Preamble

The House met at half-past Two o'clock

PRAYERS

[MR. SPEAKER in the Chair]

PRIVATE BUSINESS

PRIVATE BILLS [LORDS](SUSPENSION)

Ordered

That so much of the Lords Message [6th November] as relates to the Colchester Borough Council Bill [Lords] be now considered.

Resolved,

That this House concurs with the Lords in their Resolution.—[The Chairman of Ways and Means.]

Message to the Lords to acquaint them therewith.

Oral Answers to Questions — NORTHERN IRELAND

The Secretary of State was asked—

Peace Process (International Support)

Gillian Merron: If he will make a statement on the level of international support for developments in the peace process in Northern Ireland. [135594]

Mr. David Stewart: If he will make a statement on international support for developments in the peace process in Northern Ireland. [135604]

The Secretary of State for Northern Ireland (Mr. Peter Mandelson): We have enjoyed worldwide support for our attempts to secure a lasting peace in Northern Ireland. This has been particularly strong from the European Union, Canada, Australia, New Zealand, Finland, South Africa and the United States. I hope that the whole House will join me in thanking President Clinton for his unstinting support over the past eight years, and especially for the part that he has played in bringing about, and sustaining, the Good Friday agreement.

Gillian Merron: While we wait with bated breath for the name of the next President of the United States, does my right hon. Friend share my hope that the next occupant of

the White House will show the same dedication and commitment that President Clinton has shown over the past eight years in bringing about a successful peace process?

Mr. Mandelson: I should certainly like to be the first from the Dispatch Box to congratulate the President-Elect—[HON. MEMBERS: "Who is he?"]—whoever he turns out to be. I am sure that the next President will ensure the continuation of America's support for the peace process in Northern Ireland. I should add that, during his electoral campaign, Mr. Bush said that the new Assembly and institutions represented the best hope for peace in Northern Ireland and, during his electoral campaign, Mr. Gore undertook to support, among other things, decommissioning of illegally held paramilitary arms. Both would-be Presidents seem to have a good grasp of all the essentials.

Mr. Stewart: Does my right hon. Friend acknowledge the recent positive announcements by two American firms—Teletech and Caterpillar—to create 1,400 new jobs in Northern Ireland? Does he share my view that, notwithstanding the political difficulties in Northern Ireland, foreign investors have strong underlying confidence in the long-term prospects for peace?

Mr. Mandelson: Yes, I strongly echo my hon. Friend's remarks and welcome the investment that has come from those two companies, among others. However, it behoves us all to bear in mind that this strengthening investment performance by Northern Ireland kis come as a result of the peace process strengthening and politics working in Northern Ireland. I believe that continued investment in Northern Ireland depends on continued stability and peace. I hope, and I trust, that all parties in Northern Ireland will be mindful of that in the coming weeks.

Mr. David Trimble: While endorsing the Secretary of State's comments on President Clinton and his successor, whoever that might be, can I urge him to make the strongest possible representations to the present and future incumbents of the White House on the failure of the State Department to list the so-called Real IRA as a terrorist organisation? In a week in which we have received a police warning that more Omaghs may be committed by that organisation, can he say to the American Administration that people throughout the British isles cannot understand why the State Department is not classifying that organisation in the way that it should?

Mr. Mandelson: I am grateful to the right hon. Gentleman for raising that issue. We need constantly to bear down on the Real IRA and other dissident paramilitary groups, by all available means. When I was in the United States in September, I expressed the hope that the United States authorities would add the Real IRA to their list of designated terrorist organisations. I believe that that would frustrate the funding that the group receives from America and, crucially, assist us in carrying out any necessary prosecutions of that organisation in the United States. I am continuing to discuss that issue with my Irish opposite numbers because, clearly, the prospects


of securing that outcome will be much enhanced if the British and Irish Governments act together in making a joint submission.

Mr. Lembit Öpik: Does the Secretary of State agree that there will be international support for the decision by representatives of the Ulster Defence Association to come here—officially—for the first time yesterday, to try and establish political links between themselves and this Parliament? Does he also agree that, if that is a serious step forward in trying to create a peaceful dialogue between loyalist paramilitaries and our Parliament, there is a good chance that we will replicate the good news that we had when the IRA did something very similar a few years ago?

Mr. Mandelson: I think that it is important to encourage dialogue among and between all the parties, especially at a time when reserves of confidence and good will in Northern Ireland are dangerously low. In the coming weeks, I shall discuss with the parties a set of measures to implement all aspects of the Good Friday agreement, so as to bolster confidence on both sides of the community. Those measures must include, among other things, progress on decommissioning and fully functioning political institutions. Both are essential and neither should be frustrated by the hardliners found on both sides. The Government will never give up on the Good Friday agreement and nor should anyone else who has Northern Ireland's best interests at heart.

Mr. John M. Taylor: In the context not least of international support, will the Secretary of State confirm that he has every sympathy for the Omagh victims? In the absence so far of criminal charges, does he agree that attempts to pursue a civil action against the suspects deserve the fullest support?

Mr. Mandelson: One only has to visit Omagh, as I did again last week, to feel the hurt surrounding the absence of a conviction; it is a hurt that is felt by all the victims' families and by the wider community in Omagh. That is why, as I said in Omagh, I fully understand the motives behind the campaign. We need to continue to exert maximum pressure on those who want to destroy the peace process. I also want to place on record my admiration for the investigation team in Omagh: I know how hard its members have worked and how desperate they are to find that last piece of evidence that they can put in place to secure the conviction of those who carried out that disgusting atrocity.

Mr. Speaker: Order. Before I call the next question, I ask for quiet in the Chamber.

Royal Ulster Constabulary

Mr. John Wilkinson: What discussions he has had since the end of July with the Chief Constable of the Royal Ulster Constabulary about recruitment and retention of personnel for the RUC. [135595]

The Minister of State, Northern Ireland Office Mr. Adam Ingram: There have been numerous and regular meetings with the Chief Constable or his representatives at ministerial and official level on recruitment and retention of RUC personnel and other subjects since July.

Mr. Wilkinson: Does the Minister not believe that the record of the RUC in standing between the law-abiding people of Northern Ireland and the spectres of anarchy and bloody civil war, under the proud name and cap badge of the Royal Ulster Constabulary, is one that inspires citizens who are committed to the maintenance of law and order to join the force, and those who have served so well to stay in it; but that, if the force became subject to local partnerships or a policing board that contained released terrorists and apologists for those who maintain dumps of illegal arms, that confidence would be gravely undermined?

Mr. Ingram: Again, I place on record the Government's fulsome tribute to the RUC, which has been recognised in many different ways, not least by Her Majesty awarding the force the George Cross. Yesterday, my right hon. Friend the Secretary of State announced a substantial package for RUC widows and disabled officers, which will go some way towards dealing with difficult issues, including the deep pain felt within the organisation for many years.
As for district partnerships, they were included in the Patten report as a means of ensuring that policing would, as far as possible, be based in the local community. The hon. Member for Ruislip-Northwood (Mr. Wilkinson) is probably wholly opposed to that report, but we are confident that its provisions, once they have been given full effect through the Police (Northern Ireland) Bill, will be warmly received within the wider community in Northern Ireland.

Dr. Norman A. Godman: May I point out that cap badges have been altered elsewhere with no loss of morale; and that sensible people now accept reform of the police force? Does my right hon. Friend believe that the interim target of 30.5 per cent. Catholic representation in the police force by March 2004 is an attainable objective, given that many Jeremiahs, especially those on the other side of the House, believe that it is not a realistic goal?

Mr. Ingram: I am grateful for my hon. Friend's comments. Everyone who has read the Patten report will know how difficult it is for police services throughout the world to change in terms of representation. The Patten report cites the New York experience. With the provisions that we have set out in the Bill, we have sought to ensure that there is equitable representation. I think that that is an achievable target.

Rev. Ian Paisley: With reference to the Minister's mention of compensation for RUC widows, I welcome the move that has been made. However, there is great concern among these widows that even what is on offer is far different from what later widows have received thorough the courts. Would it not be better to have an equitable settlement so that there is no distinction between


these widows? Some of them received compensation of only a few hundred pounds after years of suffering before the Government made a decision.

Mr. Ingram: I do not know whether the hon. Gentleman has had the opportunity of reading John Steele's review, which is a comprehensive analysis of what is undoubtedly a difficult problem. The Government have supported his conclusions. We believe that we are dealing equitably with the issue. We recognise the pain and the hurt that exists for RUC widows who pre-date the 25 November 1982 change in legislation. I am sure that those widows will benefit greatly from the Government's response.

Mr. John McFall: Does the Minister agree that the population want every street in Northern Ireland to be policed? To achieve that community police force, we must recognise that the Patten report is a cornerstone of the Good Friday agreement, as agreed by the political parties in Northern Ireland. Like me, does my right hon. Friend deprecate some political parties that are trying to make a political issue out of policing?

Mr. Ingram: The Patten report was based on the premise of trying to take politics out of policing. It was a detailed analysis of the issue raised by my hon. Friend and of other issues. As we move forward from the Police (Northern Ireland) Bill to the Act, and then to implementation of the various elements of the legislation, it will take time for all the changes to bed down. The driving force is our wish to achieve a police service that is acceptable at all levels of Northern Ireland society. It is a big objective, but I think that it can be reached.

Mr. William Thompson: Does the Minister accept that, as a result of the Government's policies, the morale of the Royal Ulster Constabulary is at an all-time low and absenteeism, sickness levels, disillusionment and disenchantment are at an all-time high? What will the right hon. Gentleman do to address these disastrous policies?

Mr. Ingram: Any programme of change brings with it difficult issues with which we must deal. The Chief Constable carried out a fundamental review of the RUC. It has been judged that about 85 per cent. of its contents are set out in the Bill. Had that review been implemented, we would have had to deal with the same difficulties of change. Clearly, change brings forward difficulties. With the Bill, we are trying to take away uncertainty and to move forward into a different type of society in Northern Ireland—that is, a more normal civic society. Changes within the police service are a concomitant part of that.

Mr. Stephen Pound: It would be excessively obsequious of me to suggest that where my right hon. Friend leads, the nation follows. However, does he agree that many of the proposed changes for policing in Northern Ireland have the potential to provide a blueprint for even better policing in the rest of the United Kingdom?

Mr. Ingram: I agree entirely with those sentiments. We are saying that the way in which we have sought to interpret the Patten report takes best practices from

international experience of what should constitute an effective, efficient and acceptable police service. I have no doubt that, as we move forward and implement the measures set out in the Bill, internationally people will take positive note of the changes that are taking place in Northern Ireland and draw positive responses from them.

Mr. Robert McCartney: On the issue of morale, does the Minister agree that one of the most deleterious effects of Patten and, indeed, of the Belfast agreement has been for the RUC to see those whom it risked life and limb to put behind bars let loose on the street? Does he agree that the presence yesterday of Michael Stone, a murderous terrorist, in the precincts of the House has done nothing to give confidence either to the police or to law-abiding citizens in both communities in Northern Ireland?

Mr. Ingram: The hon. and learned Gentleman is an implacable opponent of the Good Friday agreement. I do not know what change he wishes to see in Northern Ireland that he could encourage others to find acceptable as we try to deal with that matter in a structured way, building from the ground up. On the question of released prisoners, we have made it clear—I will make it clear again—that, if any of them break their licences, they will be back in prison. We say that time and again. The Secretary of State has shown his willingness to act firmly.

Mr. Kevin McNamara: Does my right hon. Friend recall that, during the previous Administration, prisoners were released even when the ceasefire had broken down? Does he agree that what we are seeking to do, when men such as Mr. Stone visit the precincts of the House, is to demonstrate that democracy is a better way than violence, and that there are opportunities for people to enter into dialogue and for there to be inclusive solutions to the problems, recognising the differences in traditions and in attitudes, but accepting democratic methods?

Mr. Ingram: Again, I agree with those sentiments. My hon. Friend presents his arguments more eloquently than I could. He makes a valid point. Democratic dialogue is better than destruction through the barrel of a gun. That is what we seek to do as we move towards a more normalised and a more civic society in Northern Ireland. If people are engaged—no matter what their past is—in that democratic dialogue, we should welcome them into the fold of democratic change in Northern Ireland.

Mr. Andrew MacKay: Does the Minister accept that the proposed abolition of the name of the Royal Ulster Constabulary is causing huge hurt among the families of officers who have been murdered or mutilated in fighting terrorism during the recent troubles, and that that can hardly help him to retain and to recruit new officers?

Mr. Ingram: We have recognised the hurt. We understand the deep angst within the RUC family and the community, too, but what part of the Good Friday agreement does the right hon. Gentleman now support? The Patten Commission—the need to look at the whole question of policing in Northern Ireland—was an important element of the agreement. If he is now saying


that he does not support that aspect, and he does not support the release of prisoners, what does he support in the agreement? Perhaps he could help me to understand the direction that he is now coming from.

Mr. MacKay: If the right hon. Gentleman really accepts the sensitivities of the families, surely he will agree with us that, at this late stage in the Session, the Government should accept our amendments—which might be voted on in another place today—to have a joint name for the police force that incorporates both the Royal Ulster Constabulary and the Northern Ireland police force and which, therefore, takes into account the genuine sensitivities in both communities in Northern Ireland.

Mr. Ingram: The right hon. Gentleman is offering a recipe for uncertainty, confusion and continued division. That issue has been debated in the House. I, as the Minister responsible, and the Secretary of State have set out why we believe there should be a very clear approach. t is why we say that the name will be the Police Service for Northern Ireland.
I ask the right hon. Gentleman again to reflect on what parts of the Good Friday agreement he now supports. He has rejected most of the key elements that the Government must bravely take forward. I would have hoped that he could understand the need for bipartisanship on those difficult issues.

Petrol Prices

Mr. Eric Forth: What discussions he has had with the Chancellor of the Exchequer about petrol prices in Northern Ireland. [135601]

Mr. Peter Viggers: What discussions he has held with the Chancellor of the Exchequer about petrol prices in Northern Ireland. [135606]

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. George Howarth): As the right hon. Gentleman is well aware, discussions between the Chancellor and Ministers on such matters are, for obvious reasons, confidential. However, if the right hon. Gentleman exercises a little patience, he may hear more on the subject later from my right hon. Friend the Chancellor.

Mr. Forth: I am grateful to the Minister. Can he tell us whether, during those discussions, any estimate has been made by his Department or by the Treasury of the loss in revenue to the Treasury as a result of cross-border smuggling of fuel for vehicles?

Mr. Howarth: As the right hon. Gentleman probably knows, there was a Select Committee report containing some estimates. There is indeed a problem, which it would be wrong not to acknowledge. My right hon. Friend the Minister of State, who is responsible for security, is working hard with the RUC and other agencies to make sure that the smuggling of petrol or other products is dealt

with robustly and properly. The right hon. Gentleman has identified a problem which we recognise needs attention, and it is receiving serious attention.

Mr. Speaker: I call Mr. Viggers. He is not here.

Mr. John Hume: Does the Minister agree that the region that is suffering most from the petrol crisis is Northern Ireland, particularly the border counties, because of the enormous difference in price on each side of the border—85p a litre on our side and 60p a litre on the other? That is an incredible threat to the petrol industry on our side of the border, and also to the shopping centres as a result of the enormous change that has taken place because of that. Will the Government take the necessary steps to resolve the issue as soon as possible?

Mr. Howarth: The hon. Gentleman, as a distinguished Member of the European Parliament, knows that any scheme to reduce duty rates in Northern Ireland or to introduce a price subsidy scheme would require the co-operation of the Commission. Any such scheme would run into difficulties, as has been the case in other countries. Although there is a problem, which the hon. Gentleman identifies, any solution has equal difficulties attached to it.

Mr. William Ross: Given that the number of vehicles is up and the consumption of all sorts of fuel in Northern Ireland is down, is the Minister prepared to deny the estimate by some people in Northern Ireland that there has been a loss of up to £1 billion to the revenue of the United Kingdom? If he does deny that, why? Will he then produce his own estimates, as the Treasury has clearly been unable to do so?

Mr. Howarth: I acknowledged earlier that there is a problem. For the reasons mentioned by the hon. Member for Foyle (Mr. Hume), the problem has a particular impact on Northern Ireland. Speculating on the amounts involved—a Select Committee figure was mentioned—does not tell us what the solution is. We must work towards a solution that will work and will receive the co-operation of the RUC and all the other agencies, and bring it to bear on the problem. I am sure that the hon. Gentleman and the House agree that that is the sensible way forward.

Victim Support Programmes

Mr. Phil Hope: If he will make a statement about Government programmes for the support of victims. [135602]

The Minister of State, Northern Ireland Office (Mr. Adam Ingram): The Government provide funding to Victim Support (NI), which offers a range of services to victims of crime, and to the Nexus Institute, which supports victims of sexual abuse. To date, the Government have also allocated more than £6.25 million to a series of initiatives that address the needs of victims of the troubles. Furthermore, my right hon. Friend the


Secretary of State announced yesterday a substantial package of support for RUC widows and injured and disabled officers.

Mr. Hope: Given the years of neglect of the victims of the troubles in Northern Ireland under the previous Administration, will my right hon. Friend join me in congratulating the Opposition on their new-found concern for victims, and will he comment on progress on the new core funding scheme introduced by the Government to help families in Northern Ireland rebuild their lives?

Mr. Ingram: That is a blow that the Opposition deserve to have landed on them because there was some sanctimonious posturing in the way in which they dealt with some of the issues. We have had to tackle the deep hurt and grief in that divided community, and we have done so with vigour. I announced earlier the extent of how we are dealing with that. That will not be the end of the problems that we have to solve nor of our commitment to solving them.

Oral Answers to Questions — PRIME MINISTER

The Prime Minister was asked—

Engagements

Mr. Bob Blizzard: If he will list his official engagements for Wednesday 8 November.

The Prime Minister (Mr. Tony Blair): This morning, I had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall have further such meetings later today.

Mr. Blizzard: Is not the real problem with fuel prices revealed by looking at the fuel used by fishing boats? There is no duty at all on marine diesel, yet prices have trebled because of the high international price of crude oil. The trawlermen of Lowestoft cannot make a living with such high prices. They understand that the problem is not of the Government's making, but can a way forward be found so that the fishing industry can survive the high prices and the fish for our national dish can still be caught by British fishermen?

The Prime Minister: It is the rise in world oil prices that has caused most difficulty, but the industry is currently experiencing extensive and difficult restructuring. However, I am pleased to be able to tell my hon. Friend that the fisheries departments of England and the devolved Administrations will make some £60 million available during the next few years to help the fishing industry to adapt to the difficult times in which it now exists.

Mr. William Hague: For great numbers of people today their main concern is the flooding of their homes, which has caused genuine misery and distress. I know that the Prime Minister will want to join me in expressing sympathy to all those affected in recent days and, once again, profound gratitude for the magnificent response of the emergency services.
In examining what more can be done in future by any Government, does the Prime Minister agree that all parties should look again at the verdict of the Select Committee on Agriculture that the current responsibilities for tackling flooding may be too fragmented and that there is a lack of clarity as to which body is ultimately in charge?

The Prime Minister: Of course I join in the thanks to the emergency services, which, as ever, have performed magnificently in extremely difficult circumstances, and of course we will consider the Agriculture Committee's suggestion. I think that the Environment Agency is due to report back on that very issue.
I am afraid that it looks very much as if (the problem will not go away during the next few years. The floods have been the worst for 50 years and, in some cases, for 100 years. We must put in the short-term measures necessary—flood defences and so on—and then we must take, on an international level, some of the difficult decisions, perhaps ducked for too long, about some of the issues of climate change.

Mr. Hague: I thank the Prime Minister for that reply. He will know that the independent review team set up after the 1998 floods described
weaknesses in the planning and delivery of flood defence and warning policies—[Interruption.]
Hon. Members may not think this is important, but to thousands of people in north Yorkshire who have had to leave their homes it is very important, despite everything else that is happening in the world today.
The independent review team also said that, under successive Administrations, the Environment Agency
did not achieve its own performance targets.
In the light of that, would it not be sensible, across parties, to review the powers and effectiveness of the Environment Agency in dealing with flood planning and warnings?

The Prime Minister: It was precisely as a result of the lessons learned in 1998 that the new emergency warning system was introduced; and that worked well in this instance. We have also spent more money on flood defences than ever before—up by about 50 per cent. during the past 10 years or so. Of course, we shall consider what else we can do, and we are prepared to consider any suggestions.
I am glad, too, that the right hon. Gentleman sees that this is a matter for cross-party co-operation. Everyone wants to ensure that we have the proper flood defences in place. For those people affected at the moment, the situation is desperate, and we must do everything possible to help them. However, we must look not merely at the short—term measures that are necessary to protect Britain against floods, but, at an international level, at what we can do to try to reduce the incidence of such freak climate changes that are happening not just in Britain but throughout Europe and the rest of the world.

Mr. Clive Efford: Does my right hon. Friend agree that the road has not been built that can accommodate all the bandwagons on which the Leader of the Opposition has jumped recently? My constituents have approached me to say that the self-appointed leaders of the road fuel lobby do not represent their views on


investment in public services, or the need to improve education, to tackle the environment and improve the quality of the air that they are forced to breathe. If those self-appointed leaders are intent on mocking the memory of the Jarrow hunger marchers, perhaps my right hon. Friend would like to pull them over to the side of the motorway and keep them there until they feel the pangs of hunger in their bellies, and know what it is to struggle. Perhaps they will then go home and respect the need to run the country by law and democracy.

The Prime Minister: Whatever people's grievances about the cost of fuel, I hope that we can agree on two matters. First, those grievances should be pursued lawfully and properly, without trying to disrupt the country's food supplies or bring the motorways or any other aspect of the country to a halt. Secondly, anything that we do to try to address those grievances cannot be at the expense of economic stability, investment in our public services or any other action that we want to take for other people who need our help, notably pensioners.

Mr. Charles Kennedy: To return to flooding, does the Prime Minister believe that an explanation is owed to those whose homes and businesses have been flooded of the fact that, five months ago, the Ministry of Agriculture, Fisheries and Food received a report which stated that there was an urgent case for fresh investment in flood prevention measures? Why has it taken five months and the latest catastrophe before extra funds have been forthcoming?

The Prime Minister: It has not taken five months, because we have been increasing the amount of money for flood defences. The Deputy Prime Minister tells me that, in some respects, we are putting in more money than the report requested. As a result of the announcements that were made a few days ago, the Bellwin scheme will be paid at 100 per cent. That will provide significant help to people. An extra £51 million has also been announced. Before then, not only as a result of the report but because of circumstances that existed a couple of years ago, we increased investment in flood defences.

Mr. Kennedy: The House has already welcomed the additional money, but will the Prime Minister confirm two points? First, will he confirm that the additional sums will be spread over the next four years, and that the headline figure does not apply to the current financial year? Secondly, does he acknowledge, in the light of the advice that the Government received five months ago, that if they had acted earlier and with greater alacrity, some of the worst effects could have been avoided?

The Prime Minister: That is very unfair. It would be unfortunate if the bandwagon tendency had been transferred.
We have put in the extra money. It will be spread over four years, as the Deputy Prime Minister announced, but there is a limit to what we can do in the short term. We have put in additional sums of money in the past few years. Indeed, it is fair to say that even under the previous Government, additional sums were put in after the floods in the late 1980s. We must continue to make that

investment. However, even with the best investment and safeguards, there will be an increasing problem unless we also deal with some of the longer-term issues.

Maria Eagle: Does my right hon. Friend welcome, as I do, the publication of Mr. Justice Colman's report on the reopened inquiry into the sinking of the MV Derbyshire? The report exonerates the master and crew of any blame for the sinking. Will he join me in congratulating the families of the 44 people who died? Those families fought a 20-year campaign to get at the truth of what happened. Will he also join me in congratulating the Deputy Prime Minister, whose determination to reopen the inquiry has been so fully vindicated today?

The Prime Minister: I am happy to offer my congratulations on the campaign and pay tribute to the families of those who lost their lives. As my hon. Friend said, that campaign stretches over 20 years. We studied the matter very carefully on coming to office and, indeed, before that—my right hon. Friend the Deputy Prime Minister has had a long-standing commitment to this issue. We established the inquiry and we shall now study the results. I am pleased that, after two decades of trying, we are finally getting closer to the truth of what happened. We are now able to study the results of that report and take appropriate action.

Mr. Andrew George: The Prime Minister has rightly given power to places that people identify with, but when will he complete that unfinished business? Will he make sure that Assemblies in future reflect regions that people identify with, have a clear popular mandate and are fully democratic?

The Prime Minister: We have always said that that has to be driven by local people themselves—they have got to want such Assemblies to be established. In the meantime, of course, we have made considerable progress in decentralising government, in particular with the establishment of the regional development agencies. For example, the South West of England regional development agency, as the hon. Gentleman knows, played a key role in securing objective 1 status for Cornwall, which will be worth more than £300 million over the next seven years. Seven thousand five hundred new job opportunities have been created or safeguarded through the RDA and there have been 37 inward investment projects, which have attracted a capital investment of more than £100 million. Those are considerable achievements on which to build for the future.

Angela Smith: In the context of the national debate on public services, I draw my right hon. Friend's attention to the actions of Essex county council. Is he aware that, just like the Tory Opposition in the House, Essex Tories promised to tax less and to deliver more? Yesterday, however, they announced education spending cuts of three quarters of a million pounds, including more than a third of a million from under-fives education. Does that not just go to prove that people who vote Tory are jeopardising their children's education?

The Prime Minister: I suppose that at least we could accuse the Tories of consistency. What they are doing at


a local level they are committed to doing at a national level. To anybody who doubted what we were saying about the £16 billion worth of cuts, let me inform the House of what the shadow Chancellor said just a few weeks ago:
We have committed ourselves at the moment to matching them on health.
The interviewer asked, "And education?" The reply was:
No we haven't made that commitment.
It is perfectly obvious that the investment that has reduced class sizes for five, six and seven-year-olds, the investment in school buildings and the investment that has given us the best test results for 11-year-olds this country has ever seen would all be taken away by the Conservatives, were they returned to power.

Mr. Michael Jack: The Prime Minister will be aware that, after voting Labour, people in Preston are experiencing the highest council tax in Lancashire. What steps will he take to deal with the situation, at a time when members of his party in Preston are still busy fighting each other about who will speak for Labour in the by-election?

The Prime Minister: The level of the tax, of course, is a matter for the local council. Let me just say—[Interruption] Well, it is. Let me just point out that, actually, the rises in—[Interruption.]

Mr. Speaker: Order. Hon. Members should quieten down.

The Prime Minister: Let me just point out to hon. Members that the council tax rises in the last three years of the Government whom they supported were more than double the rate of inflation.

Mr. Andrew Love: What efforts is my right hon. Friend making to assist homeless families, especially in Greater London, in recognition of how adversely they were affected by Tory Governments and their failed housing policies?

The Prime Minister: We are taking measures, particularly in relation to the homeless, that have, for example, reduced the number of rough sleepers by a third in the past couple of years. We will also, by 2003, put an extra £1.6 billion worth of investment into housing. The most important thing that we can do for housing is to keep interest rates and mortgages low. Let me remind the House that in the 18 years of Conservative government, interest rates averaged 10 per cent. Under this Government, they have averaged 6 per cent. That is a saving of well over £1,000 a year to the average mortgage payer.

Mr. William Hague: Will the Prime Minister tell the House what is now the total cost to the public of the millennium dome?

The Prime Minister: The figures have been set out many times before and there has been £660 million of lottery grant—[Interruption.] Well, because the right hon. Gentleman has been going around the country attacking the funding of the dome, saying what a terrible idea it was

and that he would never have thought of it, let me refresh his memory about the Cabinet Committee GEN 36, which was established in February 1996 by the then Prime Minister to consider all aspects of the dome, including funding, financial management, who should be appointed, where the dome should be sited and how it was to be designed. I shall read out the membership of that sub-group. It was chaired by the then Deputy Prime Minister, with the Chancellor of the Exchequer and—guess who else?—the right hon. Gentleman, who was then Secretary of State for Wales. I will accept criticism of the dome from members of the public, but not from the right hon. Gentleman.

Mr. Hague: So the Prime Minister does not know how much he has squandered on the dome as a result of his mismanagement and cronyism. If he wants to quote what was said about the dome in the past, we should look at his speech in the royal festival hall, "Why the dome is good for Britain". The Prime Minister said:
It is costing just £400 million … It will turn in a profit for Britain.
Last December, the Prime Minister said:
Like anything new in Britain, the Dome has to see off … those … who are made uneasy by success.
Since then, because of the Prime Minister's plans—not the plans of any previous Administration—the Prime Minister put in £50 million when the dome started, £60 million in February, £29 million in May, £43 million in August and £47 million in September. Will the Prime Minister tell the country how much in total has now been taken out of the public pocket because of that monument of ministerial mismanagement?

The Prime Minister: Let me run through what was in that Committee's remit—

Hon. Members: How much?

Mr. Speaker: Order. I cannot tolerate hon. Gentlemen shouting, "How much?" The Prime Minister will answer the question in his own way.

The Prime Minister: The decisions to build the dome and to choose the Greenwich site were taken by that Committee. The appointment of senior managers was decided by it, as was the lottery money and financing that the right hon. Gentleman now complains about. It took the decision to split jobs between two Ministers and, we have discovered, it gave the visitor number projections. The only difference between the robbers who were caught at the dome yesterday and the right hon. Gentleman is the fact that the Tories are never caught at the scene of the crime.

Hon. Members: More.

Mr. Hague: It defies credulity—[Horn. MEMBERS: "More."] Oh, there is plenty more. It defies credulity that the Prime Minister now thinks that it is all to do with the previous Administration. There was an attempt to drive a bulldozer into the dome yesterday, but the biggest robbery is the fact that the Government did not drive a bulldozer into it two months ago. Visitor number figures were reviewed by the Deputy Prime Minister and his colleagues and were confirmed. They were not set in place by the


previous Government. How can the Prime Minister claim that the planning was due to the previous Administration, when he said:
These plans require a leap of faith …?
He went on to say that they were
the most exciting thing happening in the world in the year 2000.
How can he blame the previous Government, when he said:
The Dome itself will last for decades to come after the year 2000. It will become an international landmark …?
How can he blame it on the previous Administration when he said:
And believe me—
which always arouses our suspicions—
it will be the envy of the world …?
If the National Audit Office report to be published tomorrow seriously criticises the Government and the Ministry for their mishandling of the dome, will the Minister with responsibility for the dome take that responsibility and resign?

The Prime Minister: Let us see what the report actually says. I should point out to the right hon. Gentleman that the visitor number estimates were first done by his Government and his Committee. [HON. MEMBERS: "Oh!] Yes, it is true that they were reviewed by us, so let us share a bit of the responsibility. As for his comments about the dome, it is correct that those visitor numbers were out, although more than 5 million people will go to the dome this year; but on the other side of the balance sheet, the total value of the north Greenwich peninsular is liable to be about £1 billion. All that is true. However, I will not accept criticism from the right hon. Gentleman. When I was doing his job, I was visited by the Cabinet Minister then in charge of this project who was chairing the Committee that the right hon. Gentleman was on. He asked us for our support, and told us that if we did not give that support thousands of jobs would be at risk and a great international event would not be staged in this country. I am prepared to accept, and have accepted, criticism from the public, but I am not prepared to accept criticism from the person who sat on that Committee, took those decisions and, now that a little bandwagon has gone out, has decided to motor it off.

Mr. Hague: The Prime Minister once boasted that the dome would be the first paragraph of the next Labour election manifesto. Had he proposed to start his election manifesto by saying that his party shared this responsibility with the Conservative party? Was that what he had in mind? Now he wants to share the responsibility. Has not the whole saga shown that Ministers cannot be trusted with the public's money? Is it not true that this story of hype, emptiness, cronyism, lack of delivery and rash promises is not the first paragraph of Labour's manifesto but the last word about this Government?

The Prime Minister: Even though the right hon. Gentleman decided the financing and the management of the dome, he now tells us that it was the wrong thing to do. Two things come out of this exchange. First, he wants to deny the part that he personally played in bringing about the dome. Secondly, his opportunism does not end there. I am amazed that today of all days the right hon.
Gentleman has not come to the Dispatch Box and asked us about the economy. He has been going round the country telling us that it is in crisis as a result of our mismanagement. Why has he chosen to go on the issue of the dome? Because he knows that when it comes to the economy he has nothing to say.

Gillian Merron: Has the Prime Minister seen the survey in Saga Magazine, which shows that seven out of 10 people have given a big thumbs down to the Opposition's plans to axe winter fuel payments and free television licences for the over-75s? The survey shows that pensioners want to keep those vital payments as well as have an increase in the basic state pension—a fact that the Tories have singularly failed to grasp.

The Prime Minister: That is right. The Conservatives would take away the winter fuel allowance of £150 and the free television licences. The thing about both those sums of money that have been given to pensioners is that they are not affected by tax or benefit. It is crucially important that pensioners are allowed to receive those benefits. Once again, the Conservative party shows how it would let down the pensioners of this country.
I should also say that we will be putting more money into pensions overall in this Parliament than we would have done had we relinked the basic state pensions with earnings. That is because we on this side of the House care about all pensioners, not just a few.

Sir Teddy Taylor: In view of increasing public concern about the concentration of power in Europe, is it really true that the Prime Minister is planning to surrender the veto in substantial new policy spheres? Would it not be better for Europe and for Britain if we asked the European Union to use its current powers more sensibly, rather than passed over more power from a democratic Parliament to a non-elected body?

The Prime Minister: No; as I have made very clear, we will not surrender the veto at all on tax and treaty change issues or on a range of other issues. However, there are issues on which we would be prepared to examine qualified majority voting, when it is in our interests to do so.
Conservative Members now take the position that they will not have any extension of qualified majority voting at all. However, of the two largest extensions of qualified majority voting—far larger than anything that we have either done or proposed to do in government—the first was made by Margaret Thatcher, when she was Prime Minister, in 1986, and the second by my immediate predecessor as Prime Minister, in the Maastricht treaty.

Mr. William Cash: They got it wrong.

The Prime Minister: That is not what Conservative Members said at the time.
At the time, qualified majority voting was important. If we did not have qualified majority voting in relation to some agriculture issues or in respect of completion of the single market, for example, we could not properly protect British business interests. We should therefore judge it on a case-by-case basis. We should keep the veto when it is


essential in our national interest to do so. We should also, however, engage constructively in the rest of the debate and get the best deal for Britain.

Mr. Ben Chapman: My right hon. Friend will be aware that, on many occasions and over a long time, the issue of compensation for former prisoners of war in the far east has been raised. I am pleased, and indeed proud, that it is this Government who have made the decision to award that compensation. However, does my right hon. Friend agree that it is a matter not only of financial settlement, but of this generation recognising the sacrifice and suffering incurred, on its behalf, by an earlier generation?

The Prime Minister: The financial gratuity can never, of course, compensate properly for the pain and suffering that people went through: more than 12,000 people died as far east prisoners of war or as civilians. Yesterday, I met some of those who survived, and some of the widows of those who were killed in those camps, and one simply cannot fail to be struck by their courage, fortitude and commitment. I am pleased that we were able to make this payment to them. I think that it is long overdue, and that it goes some way to recognising the sacrifice that they made in the interests of this country.

Mr. Tim Loughton: Does the Prime Minister share my concern about the news overnight that the motor company Daewoo has gone bankrupt, and the impact that that will have on the Daewoo European Technical Centre in my constituency in Worthing and the 700 jobs that it provides? Will he and the Secretary of State for Trade and Industry bring every pressure to bear on the Korean authorities, particularly the receiver, to ensure that new owners can be arranged as soon as possible, to maintain that centre of excellence in my constituency as a viable and intact business that has a great bearing on our whole economy and not only on that of the south coast?

The Prime Minister: I can certainly assure the hon. Gentleman that we will do everything we can; indeed, our ambassador in Korea is already in touch with the Korean authorities. It is an extremely difficult situation, and I

understand the concern and anxiety that his constituents must have. We will do all we possibly can. The centre is highly renowned and very much valued indeed. I am sure that, if we can, we will secure a future for it. However, it is something that will have to be discussed in detail in the coming days and weeks.

Mr. Geraint Davies: Does my right hon. Friend agree that, on the economy, the real choice facing the British people is not between those who claim to spend more and those who claim to tax less, but between the 1 million new jobs created by the Labour party—thereby allowing more spending and lower tax, as people do not draw the dole when they are working—and Tory boom and bust, in which there are millions of people on the dole, bankruptcies, repossessions and, consequently, higher taxes and service cuts?

The Prime Minister: Two very obvious things will happen with the Conservatives, the first of which is the £60 billion of spending cuts. It is increasingly clear that those spending cuts will fall on schools, hospitals, transport, police and so on. Additionally, the policy that they are now pursuing is an absolute replica of boom and bust—which is exactly what would happen. We must avoid the danger of replicating those policies of the late 1980s and early 1990s.
To show you, Mr. Speaker, that the Opposition do not even know in which direction they need to drive their bandwagons, how about this speech from the shadow Chief Secretary this morning? Once they have decided that we might be helping people in the pre-Budget report, the shadow Chief Secretary goes on the radio and says:
If the Chancellor gives a large amount away, either in tax reductions or in spending increases, the fact is you'll just have a huge hit on interest rates from the Bank of England.
The interviewer said:
So we could expect prudence?
The shadow Chief Secretary said:
We certainly ought to demand prudence.
The Opposition have been going around telling us to do all these things; now they come along today and ask for prudence. Well, I hope they cheer when they get it.

Pre-Budget Statement

The Chancellor of the Exchequer (Mr. Gordon Brown): In 1997, Britain had a £28 billion deficit, a national debt that had doubled and rising inflation, and was at risk of repeating the old familiar cycle of stop-go. So in this pre-Budget report, which will address specific and immediate concerns, we will do nothing to put at risk the economic stability that has given this country the lowest unemployment for 20 years, the lowest inflation for 30 years, mortgages 4 per cent.—£1,000—below the average of the previous 20 years, and a Budget discipline that has enabled us to cut borrowing and to invest more every year in hospitals, schools and public services.
This hard won and newly won stability now gives Britain an opportunity that we can either seize or squander. It is the opportunity to achieve high levels of productivity growth, and so to ensure long-term prosperity not just for some, but for all. Yet every time the British economy has started to grow—as in the 1980s—Governments have made short-term decisions on tax and spending which have put inflation, interest rates and economic stability at risk. So Britain has a choice: the choice that underlies the pre-Budget report.
The risk for Britain is to repeat the 1980s mistake of taking economic strength for granted when we still have a large productivity gap with our competitors, and trying to run the economy at a capacity not yet achieved. Our choice—the choice of this pre-Budget report—is that we build economic strength by investing and, through tax incentives, encourage a new generation of entrepreneurs.
The risk for Britain is to repeat the late 1980s mistake of claiming that a surplus in one year could fund tax cuts for every year, and, by committing in tax what had yet to be earned, stoking up an unsustainable consumer boom and forcing interest and mortgage rates to rise. We will take no risks with stability. Our choice—the choice of the pre-Budget report—is to lock in stability by, as I shall announce today, prudently cutting debt and debt interest payments to keep inflation and interest rates low.
The risk for Britain would be to cut investment in education and infrastructure and to perpetuate decades of neglect and undermine our economy. This pre-Budget report makes a different choice: to move forward with our three-year spending plans, which will double public investment—from investment in education and health to investment in transport, policing and the environment; and, while continuing to cut unemployment and debt interest, to combine public spending with targeted tax cuts to do more for pensioners and, as I will show, to give families the lowest direct tax burden for 30 years. This pre-Budget statement sets out a balanced approach: first stability and prudence to keep interest rates low, secondly tackling under-investment, and then, when it is affordable to do so, making targeted tax cuts for the nation's priorities.
Let me deal first with the forecasts for the economy. Since 1997, our first and most fundamental choice has been—through Bank of England independence, tough controls on public spending and difficult decisions on tax—to build economic stability. There were those in the House who predicted that our policies would bring recession. I can report that this year inflation is meeting its 2.5 per cent. target, and that long-term interest rates

are now the lowest for 30 years—the same as those in Germany, and lower than those in America. The economy is forecast to grow by 3 per cent. this year, and manufacturing—despite its difficulties—by 1½ per cent. Exports are growing by 8 per cent. and consumer demand by 3½ per cent., with living standards rising. Business investment has grown by 1 per cent. this year as we lock in a higher level of investment as a share of our economy—14½ per cent.—than at any time in 40 years. Investment is now a bigger share of our economy than it is of the American economy.
In total, fixed investment this year has grown by 2.5 per cent. With 1.1 million men and women in work, Britain now has the lowest unemployment since 1979, the lowest long-term unemployment since 1978, the lowest youth unemployment since 1975, and the highest employment ever among women. Unemployment is now lower in every region: today, there are 1 million vacancies spread across the country. This month, we plan to reach our promised target: 250 young people moved from welfare into work—[Interruption.]—250,000 young people.
It is precisely because we have taken the trouble to build the long-term foundations for success, and precisely because we have resisted short-termism that would threaten stability in interest rates, that I can report that, even in times of uncertainty for the world economy over oil prices and exchange rates, the Treasury forecast for next year is as follows: inflation will again meet its target of 2½ per cent; manufacturing next year will grow by between 2 and 2¼ per cent.; exports will grow by 7 to 7½ to per cent.; growth will range from 2¼ to 2¾ per cent.; consumer demand will grow by 1½ to 2 per cent.; business investment will grow by 1 to 2 per cent., and total investment will grow by 4¼ to 4½ per cent.
There were those who predicted our public spending plans would lead to higher inflation and that the economy would run out of control. Between 1979 and 1997, inflation averaged 6.2 per cent. Since 1997, it has been less than half as much—2.4 per cent. Interest rates averaged 10 per cent.; since 1997 they have averaged 6 per cent. Mortgage rates from 1979 averaged 11 per cent.; since 1997 they have averaged 7 per cent. Growth from 1979 averaged 2 per cent.; since 1997 it has been 2.7 per cent.
We have steered a course of stability, but we are not satisfied. Long-term prosperity for all is our objective. We want to achieve, in this decade, full employment, higher education for the majority of young people and sustained improvements in our public services. With an end to child and pensioner poverty, we want not just some but all of our citizens to share in rising prosperity.
That long-term prosperity depends on us reaching American levels of productivity growth. By removing the barriers, tackling under-investment and skill deficiencies, overcoming resistance to new technology and removing restrictive practices wherever they arise, we will build a stronger enterprise culture open to all. Today, as part of the Government's contribution to a new and necessary drive for higher productivity, I am proposing measures, to consult on, to encourage entrepreneurship and expand investment.
To make Britain the best place in the world for multinational companies to locate, we will build on our cut in corporation tax from 33p to 30p—the lowest of all


major countries and the lowest in our history—by consulting on three major, additional changes. We propose to abolish from April 2001 the withholding tax, not only on international bonds, but normally on payments of interest and royalties between companies in the UK, and to relieve tax on sales of substantial shareholdings by companies. Finally, in line with the needs of the new economy, tax relief will be given for intellectual property and goodwill as we try to create the best environment for modern business in the world.
I can tell the House that this year corporation tax revenues are £2½ billion lower than we forecast. It has been put to me that North sea oil companies earning higher profits from higher oil prices should be subject to special taxes, but I can tell the House that I am determined not to make short-term decisions based on short-term factors. The key issue is the level of long-term investment in the North sea. This will be the approach that will guide Budget decisions in future.
My second set of proposals help small businesses, whose numbers have grown already by 150,000 since 1997. Last year we cut small company corporation tax—once 23p—to 20p and we introduced a new lop rate, an overall cut in small company tax bills of nearly 25 per cent. Today I am publishing for consultation with small businesses a set of proposals that simplify small business VAT; they will be of direct help to up to half a million small businesses. Capital allowances and tax credits to encourage investment have already saved over £800 million for business since 1997, a third of a billion pounds of that in manufacturing.
Because I understand and recognise the importance of manufacturing, I will now examine, for the Budget, further incentives to help the manufacturing sector: in particular the proposals from the Confederation of British Industry and the Engineering Employers Federation to extend the research and development tax credit.
To help smaller high risk and e-commerce companies recruit and retain the staff they need, we propose to expand tax relief for share options and to make Britain the most attractive environment for e-commerce. In future, all employees can benefit from our enterprise incentive scheme—up to a company limit of £2½ million worth of share options. For the period to May 2000, 1 propose to make provision for companies to limit and settle their liability for national insurance contributions on share options.
Having cut capital gains tax from 40p to lop for long-term investment, I now propose an even further widening of the scope of the 10p rate—to non-trading companies and to venture capital companies so that employees of all types of companies can now benefit from the 10p capital gains rate.
To enhance the contribution of institutional investors to the economy, we will consult on the Myners report proposals to reform the minimum funding requirement and to remove regulatory barriers to investing in venture capital.
To expand savings generally, and especially to double the number of low-income families who save, we will review all the capital limits that deter saving. Already, 9 million individual savings accounts have been opened, and £3 billion more is being saved in them by low-income savers. The tax-free limit for ISA savers has been set for next year at £5,000. I propose once more to set it at £7,000, a figure I shall set now for the next five years.

To build enterprise and balanced economic development across all the regions and public investment, including public-private partnerships, we are proposing today that regional development agencies have greater freedom and flexibility to decide locally how money is invested for them to meet local needs.
The rate of small business creation in high unemployment communities is still one sixth of that in more prosperous areas, and unemployment is still twice as high. Future jobs and long-term prosperity will not come from benefit cheques or the old subsidies, but by a radically different approach—encouraging economic activity and business development along the lines proposed by the Cohen and Rogers reports.
I now propose a radical reform of tax incentives that is designed to raise business investment and economic activity in the high unemployment areas of the country by £1 billion. I propose to introduce stamp duty exemption for all properties in our most disadvantaged communities; accelerated tax relief for cleaning up contaminated land; VAT cuts to reduce the costs of residential property conversions; and tax relief to bring empty flats over shops back into use.
I propose to consult on further business rate relief for small businesses in the assisted areas, and a new and generous tax credit for community investment, including support for the creation of the first community development venture fund.
To assist the upgrading of listed buildings that are central to community life in all parts of the country, I can also announce that we are today asking the European Commission to reduce VAT from 17½ per cent. to 5 per cent. for repairs to churches.
I have one other proposal for a special tax relief. We will not only continue to work for the cut in third-world debt that this and other countries are fighting for, but we now plan to do more to meet the international targets of cutting world poverty by half and cutting by two thirds infant mortality, which, through preventable diseases, carries off one in seven of the world's children before they reach the age of five.
As one of a number of proposals that the Secretary of State for International Development and I are working on to tackle child poverty, the Government will investigate a new tax incentive and a spending measure to develop, cut the costs for and ensure the supply of anti-TB, anti-malaria and anti-AIDS drugs—drugs that could save lives and that are tragically still unavailable in the poorest countries, but drugs which have the potential, which must now be realised, to reduce avoidable suffering and unacceptable deaths.
I turn to the pre-Budget measures to meet our goal of full employment. In addition to making work pay through the 10p income tax rate, our working families tax credit and the new deal—which some would abolish, but which, as independent research shows, has cut youth unemployment by 40 per cent. more than would have happened without it—the Secretary of State for Education and Employment and I will work to intensify coaching help for the 50,000 young people who are still out of work. We will consult on introducing a new service that will help redundant workers to move quickly into new jobs. We will investigate how, with tax-free and, in some cases, free adult learning, we can help to upgrade fast-changing workplace skills.
We will extend the new deal for lone parents with our nationwide programme of choices starting next April, and extend to a further 150,000 lone parents not on income support the opportunity, in the programme of choices, to get back to work. We will agree a new partnership with the voluntary sector to help those with disabilities who want work to get it, while with a £200 million a year additional package that the Secretary of State for Social Security will announce tomorrow, we will take action to improve the living standards of those unable to work who are disabled, and of those who care for them. For each area, we will proceed to draw up local full employment plans addressing all barriers to full employment in their local areas.
High productivity and rising employment depend not just on ending decades of under-investment and targeting tax incentives on our priorities, but on entrenching a low-inflation culture that prudently keeps interest rates and mortgage rates as low as possible. It is because we have learned from the mistakes of the 1980s and before, that I can tell the House that, in spite of the demands that are being made to me, 1 have decided, in the interests of keeping interest rates and mortgage rates as low as possible, to lock in over the coming years a fiscal stance that is the same or tighter than we set at the time of the Budget.
Let me give the House the background and the full financial figures. Our first rule—the golden rule, which is necessary to keep interest rates and mortgage rates as low as possible—is that over the cycle there must be a current surplus. So, however tempting it may be for some to identify large temporary surpluses as an excuse for permanent injections of resources into the economy, our golden rule demands that there is constant prudence.
In the Budget, I forecast this year's current surplus at £14 billion. I now forecast it to be £16.6 billion. In the years from 2001–02 onwards, the current surpluses are forecast to be £16 billion, £14 billion, £8 billion and £8 billion—figures that will ensure that we remain on course to balance the current Budget over the economic cycle, even on the most cautious of cases.
Our second fiscal rule—the sustainable investment rule, which is a bulwark against short-termism that again helps to keep interest and mortgage rates as low as possible—is that while, over the cycle, we will borrow for investment, we do not borrow for consumption and we keep debt at a prudent and sustainable level below 40 per cent of national income.
After a doubling of national debt in the early 1990s, the ratio of debt to national income had by 1997 risen to 44 per cent. Having made the necessary and difficult tax and spending decisions, in the three years since 1997 we have reduced the ratio of debt to national income from 44 per cent., to 41.9 per cent., to 39.6 per cent., and now to 36.8 per cent. this April. I can report to the House that two decisions—first, the decision to use the proceeds from the spectrum auction to reduce our debt and, secondly, to use this year's surplus for repayment of debt—now make possible a further and even more substantial reduction in debt that will keep interest rates low.
Because we are, in total, cutting the debt by as much as one third, I can report to the House that the public sector net debt as a share of gross domestic product will

now fall from 36.8 per cent. last year to 32.3 per cent. this year to 30.9 per cent. in 2001–02. In addition, from what was a debt to GDP ratio as high as 44 per cent. in 1997, I can report that this ratio is forecast to fall to 30 per cent. and remain there in future years. With long-term interest rates lower and debt well within that 40 per cent. ceiling, we are not only well placed to deal with the inevitable ups and downs of the economic cycle, but we have the best platform possible for years for sustained long-term growth.
Our budget forecast for net borrowing was a surplus of £6½ billion this year. Now, we forecast the surplus to be £10 billion, and £6 billion next year. In future, the deficits will be £1 billion, £10 billion, £12 billion and £13 billion as we borrow to invest. In every one of the next five years, adjusting for the economic cycle, there will be a fiscal stance that is the same or tighter than at the time of the Budget—and this year, with the spectrum proceeds, the net cash debt repayment will be £28 billion.
Our approach is to reject the old vicious circle of the '80s—rising debt, higher long-term interest rates, higher debt repayment costs, lower growth, higher unemployment, then enforced cuts in public spending. That was the old boom and bust. Instead, as we have promised, we have by our decisions created a virtuous circle of falling debt, lower long-term interest rates, lower unemployment, lower debt repayments and a stronger economy releasing more resources for public services.
I can report to Members that because of this virtuous circle, lower unemployment has brought savings in social security which, compared with the Budget, provide an additional £1.5 billion next year, and £2 billion and £2½ billion in the next two years after that. In addition to higher Government revenues this year from higher employment, higher earnings growth and from steady growth, debt interest payments are now lower than we forecast at the time of the Budget—by £2½ billion next year and £2 billion in each of the next two years after that.
When we came into Government, we were paying out more in debt interest payments than we were spending on all our schools in the country. Soon, as a result of cutting these debt payments, we will be able to spend 50 per cent. more on our schools than we do on debt interest. Over the past 20 years, 42p of every additional pound spent went to debt interest and social security. In the early '90s, it rose to 50 per cent. of every additional pound spent. Debt and social security will now require only 17p of every pound, and that leaves more than 80p in every pound of additional spending to go to hospitals, schools and vital services, and it enables us to tackle the long-term under-investment in Britain.
Because we have cut the costs of debt and unemployment—now costing £5 billion less than in 1997—and because we have secured sustainable growth, we are able to lock in the fiscal tightening and meet all our fiscal rules, and, within this prudent framework, we are in an even stronger position than in July to tackle under-investment and to target tax cuts on our nation's priorities.
Since July, I have received representations from many people in this House about public spending, including representations from the Conservatives, who propose spending growth only in line with 2 per cent. GDP growth a year. I have studied that proposal in detail. It would


mean, by year three, cuts in spending of £16 billion—and after taking into account the measures I will announce on pensions today, more than £16 billion.
I have rejected those representations, and because the economy both needs and can afford to—and cannot afford not to—tackle the under-investment in our country, the Education Secretary will tomorrow, as part of allocating his annual 5 per cent. real-terms increase in education next year, announce new resources for the Learning and Skills Council.
Because investment is needed in our infrastructure not just for social but for economic reasons, the Minister for Transport will announce how every region, city and town will benefit from new investment in roads. With new funds from the spending review allocated to each region for economic regeneration, the Deputy Prime Minister will shortly publish his rural and urban White Papers.
As part of the 5.6 per cent. real-terms rise in NHS spending for the next three years, the Secretary of State for Health will announce for each of those years his allocation to health authorities up to 2004, giving them the stability and certainty that they want for their spending.
In addition to the statement on pensions from my right hon. Friend the Secretary of State for Social Security tomorrow, and the extra allocation that we have made to improve flood defences, my right hon. Friend the Secretary of State for Education and Employment will announce today additional allocations to our schools.
The windfall tax is money raised from the utilities specifically for the purpose of extending employment opportunity through the new deal and educational opportunity through renovating, so far, 17,000 schools. Such has been the success of the new deal in getting people back to work that the windfall levy account is underspent by £200 million. So my right hon. Friend and I have decided that, in addition to this year's rise in education spending, lower unemployment means that we can allocate new money to every school in every constituency of the country—money to be available this year for repairs and improvements; money to be paid direct to the school.
The head teacher of every primary school will receive a cheque for between £4,000 and £7,000. The head teacher of each secondary school will receive, for the smaller schools, £10,000, and for the larger schools, £30,000: prudence once again for a purpose, enabling us to target resources to our priorities and in a sustainable way. That prudence now allows us to match public spending increases by tax cuts targeted on the country's priorities, including making reforms in the tax treatment of transport and the environment, to which I now turn.
Between 1997 and 1999, retaining the fuel escalator introduced in 1993 helped cut borrowing by £30 billion, helping deliver lower interest rates. It enabled us to begin the long-overdue investment in transport, the NHS and schools, and it will have brought about a cut in carbon dioxide pollution by an estimated 1 million to 2½ million tonnes of pollution by the year 2010.
Today, like all countries, we are having to deal with the rise in world oil prices from $11 to $31. Because the Organisation of Petroleum Exporting Countries itself accepts that the world price is unacceptably high, our international efforts are geared to ensuring that production is raised and prices fall. Therefore, I recognise and

understand the very genuine concerns that motorists and hauliers have. It is because we have already managed to cut our deficit, already set aside £180 billion for our 10-year transport plan, and already shown how we are meeting the Kyoto targets, that in the last Budget we removed the fuel escalator and made environmentally based cuts in car and lorry licence fees, and gave new incentives for environmentally efficient fuels. In line with the principles that we set down then, I am now able to show how we can complete those reforms and do more to meet people's concerns, without putting at risk economic stability, necessary investment in public services or the environmental gains. Indeed, the reforms that I propose today are tailor-made to meet our environmental obligations.
The annual rise in the price of fuel that would be automatically introduced on Budget day would raise £560 million, putting petrol and diesel up by about lip a litre. I propose, at that cost of £560 million, a freeze in excise duties—an across-the-board duty freeze on all fuels that would initially last until April 2002, and, if the oil price remains high between now and then, I can tell the House that there would be a duty freeze for a further year.
I intend to go further, however, in three vital respects. On top of the duty freeze that we had budgeted for in our fiscal arithmetic, the first of the proposals I will consult upon would itself involve additional expenditure of as much as £1,000 million and help to promote substantial benefit to the environment. Yesterday, we published a report showing the environmental benefits from the introduction of ultra-low sulphur diesel in reducing local air pollution. As a result of cuts we made in excise duty on ultra-low sulphur diesel, usage of that fuel has risen in Britain from 20 per cent. in 1997 to 40 per cent. in 1998 to 100 per cent. in 2000. It requires no change to be made in lorry and van engines. It now accounts for virtually 100 per cent. of the market for diesel in Britain today, and Britain is now leading in this cleaner diesel fuel.
We now need to build on that environmental achievement. The widespread use of ultra-low sulphur petrol would further and significantly improve local air quality. Crucially, it would require no change to existing car engines. It is now time to make this cleaner fuel available in every petrol station in the United Kingdom and to make the use of this fuel, which requires no change in any car, cheaper for everyone. To do so I propose to cut the excise duty for ultra-low sulphur petrol so that it replaces unleaded petrol in every petrol station and at a lower excise duty.
On 1 October, we reduced the duty on ultra-low sulphur petrol by 1 p a litre. I propose from Budget 2001 a further reduction of 2p a litre—making a cut of 3p in total on all ultra-low sulphur petrol. Because it is right to maintain the proper balance between petrol and diesel, I propose also from Budget day to match the cut in ultra-low sulphur petrol with a 3p cut in excise duties on ultra-low sulphur diesel, which will go to all diesel users. I expect ultra-slow sulphur petrol and diesel to account for 100 per cent. of the market next year. When the excise duty cut is introduced at Budget time, motorists using any petrol station in Britain should be able to benefit from this duty cut.
It is by giving this incentive for cleaner fuels that we can both advance our environmental principles and ensure—with the 3p cut per litre in all ultra-low sulphur duty—a cheaper cleaner fuel available in every garage, a better deal for drivers and cleaner air across Britain.
I can also announce that for all cars that still use lead replacement petrol—where there is no longer an environmental case for a higher duty rate—I propose from Budget day to end the differential and cut the excise duty by 2p a litre.
I now intend to go further to help the haulage industry, which is undergoing restructuring. I propose support for scrapping or converting older lorries, with a £100 million investment fund that will include help for buying the new lorries that meet the technological and environmental standards of the future and support for the introduction of logistics and computerisation in the industry. The Deputy Prime Minister will also announce help for an industrywide training and retraining scheme.
We can do more. So that foreign lorries pay their share of the costs of using our roads, we intend to introduce in Britain a vignette system, a British disc under which non-British companies and lorries pay their share to Britain for using British roads.
The Government have considered an essential-user rebate or blue diesel scheme for lorry diesel. However, such a scheme would be administratively cumbersome; it could be levied only on future purchases of diesel; it would have to be open to foreign lorries using British roads; it would not help hauliers where their fuel prices are directly passed on to customers; and it would have no environmental benefits in itself.
The scheme I am proposing is far better. Subject to consultation and legal clearance, I now propose to bring forward a much needed reform, begun last year, in vehicle excise duty for lorries. It will radically cut rates for larger lorries that have traditionally high licence fees. The scheme will be implemented in Budget 2001. It will sweep aside the 100 separate rates; it will consolidate them into only seven rate bands, which will be linked to environmental standards; and we shall cut the rates to match the lowest in Europe.
Lorries in the most competitive sector will save over £2,000. Over 250,000 lorries will each pay lower licence fees as a result of a £300 million total cut in licence fee costs. One hundred thousand lorries will save over £1,000. The average saving per lorry will be £715 a year. The cuts are equivalent in value to a cut of 3p in the price of diesel for the haulage industry—again, with environmental incentives built in to the new licence system. Our proposals for the detailed new scheme and licence rates are published today, and the Government are able to start the transitional arrangements to the new licence system immediately.
I have allocated £265 million for this financial year—half of the annual revenue raised from lorry VED—to be spent before March for a refund scheme that can repay lorry owners up to half of this year's licence fee. Two hundred and fifty thousand lorries and all large lorries will benefit from the refunds—they will be worth, for some of the largest lorries paying the highest fees, £1,000, and up to £4,000 this year. Refunds will be paid from next month,

with payments to be completed by the end of January. The detailed arrangements will be announced by the Minister for Transport.
To help restructuring and investment in farming, the Minister of Agriculture, Fisheries and Food announced last week an addition to this year's £220 million packages of measures: agrimoney compensation for arable producers. In addition to freezing red diesel duty at its current rate, I intend in Budget 2001 to abolish vehicle excise duty on tractors and agricultural vehicles.
I now have a similar proposal for car licence fees. It is consistent with our environmental principle that we tax vehicle ownership less, and I now want to complete the environmentally based reform of vehicle excise duties for cars. The new licence fee that we are introducing for new cars registered from March 2001 is linked to environmental efficiency. For all cars under 1200 cc, there is now a lower rate licence fee with a £55 deduction on the standard fee.
While that change has been welcomed, many—especially those in rural areas—have put it to me that greater choice would be available to rural motorists and motorists generally if the £55 deduction could be accessible not only for cars under 1200 cc, but for cars up to 1500 cc, including the Focus, Golf, Astra, Escort and Rover 214. Therefore, I propose to extend the lower rate licence fee and the £55 discount to cars up to 1500 cc, to be paid out from July but to be backdated to today. All those who have a car from 1200 cc to 1500 cc—that is, an extra 5 million cars—will be entitled to £55 off their annual licence fee from today. In total, 8½ million existing cars—one in three—will now pay £55 below the standard fee.
So for motorists as a whole, with the duty freeze, the new reduced licence fee and the cut for ultra-low sulphur petrol, the proposed Budget package will make changes worth the equivalent of a 4p a litre cut while meeting our environmental objectives. By next year, for the haulage industry, there will be changes worth the equivalent of a cut of 8p a litre. In each case, we shall be meeting our environmental obligations and not putting at risk public investment in our vital services or the stability of the economy. Ministers are now inviting discussion of those measures in the pre-Budget consultation, which will take place as Ministers visit every region of the country.
I come now to specific measures of benefit to families and to pensioners. Our aim is that not just some, but every child has the best start in life and that we halve child poverty in the coming decade. Families need help most at the time when parents are bringing up their children. As we extend our new integrated system of child support—from £15 a week for every child to a maximum of £50 a week—our priority in the coming Budget is the new children's tax credit, which is a tax cut for families. This family tax cut, which replaces the married couple's allowance, will be paid on top of child benefit to around 5 million families at £8.50 a week, worth £442 a year.
On current figures, the proposals on which we are consulting would, if implemented, mean that overall the tax burden would not rise next year, and I will achieve my aim of next year cutting the direct tax burden on the typical family to below 20 per cent. It will fall to 18.6 per cent., the lowest level since 1972. However, I believe that in the coming Budget we can offer a larger tax cut for


families. My aim is to increase the family tax cut to £10 a week, in total a £520 a year tax cut that will increase families' incomes.
Just as we are introducing a new system of child support based on the foundation of child benefit—at the heart of which is the working families tax credit and the children's tax credit—so too it is now time, based on exactly the same principles, to raise pensioner incomes by a tax and benefit reform that will have as its foundation the basic state pension, and will have as its building block—like the working families tax credit—a new and generous pension credit.
Our aim for pensions reform is both to end pensioner poverty and to ensure that all pensioners share in the rising prosperity of the nation. In a new world of rapidly diverging pensioner incomes—already, 17 per cent. of couples are retiring on more than £20,000 a year, a percentage which grows year by year—and where, as a result, inequalities between pensioner incomes are as great as inequalities within the population as a whole, we will best meet our obligations to pensioners by a new approach.
To plan for the future based on a flat rate earnings-linked rise paid to all, which would give exactly the same to those with incomes above £20,000 as to those on middle incomes—and because the income support system would do absolutely nothing for the poorest—would mean that by the time today's 45-year-olds were retiring, for every £6 billion extra spent on the earnings link, £2 billion would go to pensioners with incomes above £20,000 at today's prices. That would mean that less would be available for the middle and lower income pensioners in greatest need, who are our first priority.
We need a policy that does most for those who need most and at the same time ensures that all pensioners—the very poor, those on modest incomes and the relatively comfortable—share in the rising prosperity of the nation. Let me tell the House what the new system, which will integrate tax and benefits and build upon the basic pension a new pension credit, will look like in 2003, and then I will set out the transitional arrangements.
First, for those in and at risk of poverty, we will radically improve the minimum income guarantee. I can tell the House that the minimum income guarantee, which was £68.80 in 1997, is £78.45 today, and will be raised in April by £14 a week to £92.15. For thousands of our poorest pensioners, that will mean £700 extra a year. I can also tell the House that when the new system is introduced in April 2003, the minimum income guarantee will be set not at £92, but at £100 a week, £22 a week more than today. For the first time, a single pensioner will be guaranteed at least £100 a week. For couples, there will be a rise from £106.60 in 1997 to £154. Every year after that, I can tell the House that the minimum income guarantee will be raised in line with earnings.
With the winter allowance, there will be a 32 per cent. increase in pensioner income for this group even after inflation. That demonstrates our determination that no pensioner is left behind as the Government work to ensure that pensioner poverty in this country becomes a thing of the past. More than 2 million pensioners will benefit. People will be able to claim by phone. They will do so at the point of retirement, and adjustments thereafter would need to be made only when circumstances changed.
We have a second obligation—to millions of pensioners who, after a lifetime of hard work, have modest occupational pensions and modest savings, but receive nothing, and have received nothing over the years, from the system on top of their basic pension and have until now been penalised, not rewarded, for their savings.
These are people whom we meet every week in our constituencies, and this Government are determined that people who have worked hard and saved hard all their lives should now receive more.
Tomorrow the Secretary of State for Social Security's statement will outline the new integrated tax and benefit system—both the pension credit and the new pensioner tax arrangements. I said in the Budget that we wanted the beneficiaries of the new credit to be single pensioners with incomes of up to £100 and pensioner couples with incomes up to £150. I can now say to the House that pensioner couples with incomes below £200, and single pensioners with incomes below £135—many millions of pensioners—will now receive this new pension credit when it is introduced. I can also tell the House that, while the pension will rise in line with inflation, the new pension credit will also rise in line with earnings every year.
In this way, we will give recipients of the pension credit more than even the earnings link in the basic state pension would give them. The pensioners tax allowance will be set at April 2003 at an even higher level— £6,560 for the single pensioner before tax is paid—and for the next Parliament we propose the pensioners tax allowance will also rise in line with earnings.
For the vast majority of pensioners, therefore—middle and low-income pensioners—in Britain, the new system will provide extra cash on top of the basic pension: sums of between £1 and £23 a week extra. And we will achieve all our aims: for millions of the neediest pensioners, relief from poverty; for those on modest incomes, a reward for their savings and occupational pensions higher than an earnings link would give them; and ensuring that all pensioners can enjoy a share in the rising standards of living of our country.
As we move to this new and better system, the Secretary of State for Social Security and I have decided that the transitional arrangements should ensure that over the next two years, pensioner incomes should rise faster than inflation—indeed, faster than earnings—so from April next year we propose that, for the single pensioner, there should be a cash increase of £5 a week; and for a married couple, a rise of £8 a week. I can tell the House that in the following year we can also guarantee the pension will rise above prices—a cash increase of £3 for single pensioners and £4.80 for married couples. Over two years, therefore, there will be a cash rise of £8 for single pensioners and £12.80 for couples—for pensions, £2.6 billion more: more than the link with earnings would give; more each year, on top of more for health, education, transport, policing and the public services.
Those who would spend this money on tax cutting should now tell us which hospitals, which schools, which public services they would cut. The Government have made our choice: investment; targeted tax cuts; keeping mortgage rates low; more for pensions and families—a stronger, fairer Britain.
I have one final announcement. I have had representations to abolish the winter fuel allowance, and, indeed, to abolish the free TV licence for over-75s. I have


even received representations to abolish the Christmas bonus. I have rejected such options, which would give with one hand and take with another.
I can confirm that, now and in future years, the free TV licence will remain for the over-75s as we have promised; the Christmas bonus will continue; and the winter allowance will be paid at £150. But the transitional arrangements to our new pension reform will start not next year but this year; indeed they will start this week. I can confirm that cheques are being sent out from Monday that will be paid to every pensioner household in Britain. The winter allowance will not be paid at £150 this year. Nor will it be abolished. For this year specially—the first year of the transitional arrangements—it will be paid not at £150, but at £200 for every pensioner household, free of tax.
I commend the statement to the House.

Mr. Michael Portillo: I begin by drawing attention to my declaration of Member's interests.
This is the first chance that I have had to address the Chancellor since his wedding, and I should like to congratulate him and his wife
and wish them both every happiness.
There is much in the right hon. Gentleman's statement which, on reflection, we will be able to welcome, particularly the changes in VAT on churches and the initiative that he announced today on aid to the third world. However, it was certainly not the statement that the Chancellor intended to make.
In all the Chancellor's public pronouncements, he boasts about how he always plans for the long term and how he abhors quick fixes. The statement was all about short-term tactics and quick fixes. [Interruption.] The Chancellor today was in full retreat. [Interruption.] Indeed, this was the statement that the Chancellor told us he would never—[Interruption.]

Mr. Speaker: Order. The House must come to order.

Mr. Portillo: This was the statement that the Chancellor told us he would never be able to make. Did not Ministers tell us time and again that they could give no concessions to pensioners and no concessions to motorists? [Interruption.] Yes, they did, because they said that that could be done only at the expense of closing schools and hospitals. Why did not the Chancellor repeat that spurious nonsense today? Can he tell us, as a result of the changes that he has made today, how many schools and hospitals he has had to close? Once again, the insincerity and spin of this Labour Government have been laid bare.
The Chancellor tells us that things have changed because he now has a large surplus. Whose surplus is it, anyway? It is the people's surplus. It has arisen because the people of this country have been overtaxed. The Chancellor has overtaxed the British people: £5 billion of that surplus has come from the taxes that he has imposed on pension funds; £5 billion has come from the extra taxes that he has imposed on business; and £5 billion has come from the extra duties that he has imposed on petrol and diesel.
Those foolish increases in duty led to one of the two problems that the Chancellor had to come to the House to address today. The fuel protest was in fact a revolt by the taxpayers of this country, who have been overtaxed by the Chancellor—people who are not well off and who have been overtaxed—but he proposes to tax them even more.
The Chancellor's figures revealed today confirm that there would be no room for tax cuts under a future Labour Government. [Interruption.] Today the right hon. Gentleman is in pre-election mode, but will he admit that his plans to raise public spending by more than the country can afford year after year mean that there will be tax increases year after year in the coming Parliament? Does he have any understanding of what the extra burden of tax and regulation means for our economy? [Interruption.]
Today's statement, like all the Chancellor's others, was characterised by a great deal of micro-economic meddling by a highly interventionist Chancellor who is fiddling while Britain slips behind. [HON. MEMBERS: "Nor] Oh, yes. The Chancellor was very selective in the figures that he gave us today. Why is it that since the Chancellor has been in charge—[Interruption.] Hon. Members should listen to this.

Mr. Speaker: Order. I appeal to the House to allow the right hon. Gentleman to state his case.

Mr. Portillo: Why is it that since the Chancellor has been in charge, Britain has grown half as fast as the United States? Why is it that, over the past three years, the growth in the British economy has been slower than it was in the previous 15 years? Why is it that under Labour, Britain's share of world exports is slipping fast? Why has productivity been cut by half under the Government, so that it is now half the United States rate? Those are the proper measures of Labour's lack of economic success.
Let me tell the Chancellor today that his changes to individual savings accounts will not help. This is the Chancellor who raided the nation's pension funds and abolished PEPs and TESSAs, and this is the Chancellor who has reduced the nation's savings to their lowest level since 1963.
Is it not ludicrous, too, that the Chancellor who abolished mortgage interest relief, and who has done more than any other to raise stamp duty year after year, now tries to pose as the house buyer's friend in inner cities? If he claims that cuts in stamp duty in inner cities will help householders and businesses, will he now admit how much damage he has done with the swingeing increases that he has imposed in the past?
For all the Chancellor's gimmicks, the simple fact is that, because taxes have been rising, real disposable incomes in Britain have not been growing. People noticed that before the economists did, and that is what the fuel protest was about, and that is when the taxpayers bit back.
The Chancellor loves to talk of stability, but he has delivered a standstill. He has delivered a Britain in which living standards are not rising and the traffic does not move. The Chancellor's proudest invention—the stealth-tax policy—now lies in ruins.
Was it not this Chancellor—let us all remember this—who not only caused the problem of the fuel protest, but the problem with the pensioners as well? It was this


Chancellor, was it not, who insulted Britain's pensioners by raising their pensions by 75p? Was it not this Chancellor who, being far too clever by half, decided to raise the pension by 1.1 per cent. and fuel by 3.4 per cent., and claim that both were in line with inflation? I tell the Chancellor of the Exchequer today that Britain's pensioners will never forget what he did to them. [Interruption.] We welcome—[Interruption.]

Mr. Speaker: Order. The hon. Member for Chorley (Mr. Hoyle) should not shout across the Chamber.

Mr. Portillo: We welcome the extra money for pensioners, but here again there were short-term fixes. When will the Chancellor of the Exchequer come up with a long-term solution for properly funded pensions in Britain? Will not today's announcement dent the Chancellor's credibility even more? Is not this the man—and listen to this—[Horn. MEMBERS: "Oh!"] Well, I am going to quote the Chancellor. If hon. Members do not want to listen to the Chancellor, that's all right. Is not this the man who, addressing the Labour party conference before the last election, said, "I want the next Labour Government to achieve what in 50 years of the welfare state has never been achieved—the end of means-testing of our elderly people." Yet today he has announced the most massive extension of means-testing for elderly people. I remind Labour Members what means-stesting means. It means all the indignities and humiliations of filling out the form.
The Chancellor has done that in two ways. He has vastly increased the number of people who now have to apply for means-tested benefits, and, on top of that, pensioners with savings must now also be means-stested if they are to qualify for their credits. Is not the whole scheme typical of the Chancellor? It is a scheme so incredibly complicated that none of our constituents will be able to understand it, and none will know what they are entitled to.
Today, the Chancellor has announced the rates of pension that the Conservatives will inherit if we come to office in May. We welcome them, but we, the Conservatives, will do better. Under a Conservative Government, the pension next April would be £9.50 higher for a single pensioner over 60 or 65; £13 higher for a pensioner couple over 65; £11.60 higher for a single pensioner over 75; and £16.10 higher for a pensioner couple over 75.
We are perfectly straightforward about the fact that we would roll up the winter fuel allowance, the Christmas bonus and the free television licence for the over-75s, and we would use all that money, and the many millions of pounds saved in administration costs, to pay a higher weekly pension. Moreover—I want the Prime Minister to take this in—we would make that money tax free and we would adjust the income-related benefits as well.
The taxpayer revolt this summer marked a watershed, and the moment when people in this country realised that the Labour Government had betrayed them. Conservatives warned the Government [Interruption.] Oh, yes. We said that we should charge foreign lorries for driving on our roads. We voted against the duty increases and campaigned against them; we recommended a 3p cut for fuel, and the Chancellor would not listen. However, it seems that he has had to listen. It seems that he has had

to listen to everything that we said. The vignette has been introduced today. It was a Conservative idea, as was the 3p cut for fuel. We accept the right hon. Gentleman's tribute to our policy.
The Chancellor proudly told the Labour party conference that he would not give ground to those who pushed the hardest and shouted the most. Does anyone seriously believe that we would have had today's statement if it had not been for fuel protest, the panic on the Labour Benches and the fact that the Government are planning an early election?
When the Chancellor first became a Minister, how did he lose touch so quickly with real life? When he increased the pension by 75p, how did he have so little understanding of what it is like to be a pensioner struggling to get by? How did he have so little understanding of what it is like to be a mother trying to take her children to school [Interruption.] Oh, they laugh—they laugh at mothers taking their children to school. How did the right hon. Gentleman have so little understanding of what it is like to be a mother having to find £50 out of her purse to fill the tank?
The right hon. Gentleman is truly the Chancellor who did not understand. He has come to the House today to shore up his political position. However, he has shown no sign of understanding, and he never says he is sorry. [Interruption.] That refusal to apologise diminishes the Chancellor. He is not half the Chancellor he was a year ago. [Interruption.]

Mr. Speaker: Order. Once again, I must appeal for order in the House. There should be no shouting across the Chamber.

Mr. Portillo: I do not believe that people will be grateful to the Chancellor for what he has done today. People will remember that he was the cause of the problems. He caused the fuel problem by overtaxing the British people; he caused the pensions problem by insulting our pensioners with the 75p increase. Today he has merely returned a little bit of the people's surplus, but he still plans to take it back through higher taxes if he wins the next election.
When the Chancellor stood up today, Britain had the most expensive petrol in Europe. Now that the Chancellor has sat down, Britain still has the most expensive petrol in Europe. That will be the verdict of the majority. The statement revealed a Chancellor in full retreat, blown about by public opinion, but still a man, who, even in those circumstances, could not come to the House and say, "I'm sorry."

Mr. Brown: I shall answer in detail every point that the right hon. Member for Kensington and Chelsea (Mr. Portillo) made. If he wants to compare our respective records, let us remember what happened when he was at the Treasury: 22 tax rises, interest rates at 15 per cent. for a year, interest rates above 10 per cent. for four years and the exchange rate mechanism debacle. He was the Minister who introduced the fuel escalator, put VAT on fuel, and introduced the airports tax and the insurance tax. He was even one of the brains behind the poll tax.
When the shadow Chancellor said that he welcomed some of our measures—the overseas development tax relief and some of our pensions measures—his silence on


other matters was notable. Does he welcome our spending on schools? Does he welcome our spending on transport? The Leader of Opposition said yesterday that under-investment in transport was a problem in Britain. Does he welcome our spending on children's benefits? Does he welcome our spending on getting people back to work?
When the shadow Chancellor says that spending in this country should increase by 2 per cent., not 3.4 per cent; that the gap must be bridged by spending cuts; and that anything more than 2 per cent. is unsustainable and would lead to recession, he has a duty to tell the House how many nurses and doctors, and which schools, hospitals, public services and constituencies, including those of Conservative Members, would suffer as a result of the cuts. And he has no credibility when he says to the House that he will give tax cuts to the people of this country if he will not tell the country where those spending cuts will be made.
The right hon. Gentleman said that he supports some of our measures on pensions, but let us remember that Conservative policy is to abolish not only the winter allowance and the free television licence, which is now going out to several million pensioners, but the Christmas bonus. In 1987, when the shadow Chancellor was the Minister responsible for the Christmas bonus, he said: "Pensioners budgeting for Christmas need the assurance of that contribution to their expenses which this payment provides. The bonus is something to which the majority of the elderly look forward very much. What other people call fringe benefits are of substantial help to the poorest groups in our society."
I thought that Christmas was a time for giving but, under the Conservatives, it would be a time for taking. I can imagine the Conservative pledge card during the election campaign. It would say: "Abolish the new deal. Abolish the working families tax credit. Abolish free television licences. Abolish the winter allowance. And abolish the pensioners' Christmas bonus." The Conservatives would abolish good will for Christmas.
When the shadow Chancellor moved on to the question of the economy, I began to see the wisdom of the words of Lady Thatcher, who said, only a few days ago: "He"—that is, Portillo—"has become very confused. He no longer understands his beliefs." On 18 September, the shadow Chancellor was asked about the effect of public spending commitments on the economy, although today he has not lived up to his promise. He said, "We have to show how all the sums would add up. We have to make sure we have a coherent programme for reducing taxes—how we would save the money necessary to reduce taxes. We want to present that in detail and show how it all adds up together." Today, what did we hear from him? No specifics, no detail, no promises—not even an analysis.
When the shadow Chancellor imagines that he can go into the general election and promise tax cuts year after year on the basis of a year or two's surplus, he is making exactly the mistake—the fatal flaw—that the Conservatives made during the 1980s. His economic policies would return us to stop-go boom-bust. There were four fatal flaws in the Conservative policies of the 1980s, each of which are also flaws in his approach. There are no fiscal rules, so there is

no budget discipline. He has given us no indication of the rules that he would follow, which is what produced traditional Tory boom and bust.
The shadow Chancellor told us that he would have tax cuts instead of investment, but the neglect of investment produced the problems in our supply side that meant that we could not sustain a consumer boom because there had been no investment during the 1980s. He has no inflation target—not even our symmetrical inflation target—and he even doubts whether he would keep the Bank of England independent if, as he put it, he could judge it to be incompetent. Most people have that view of him and his economic policies. In all those areas, the Conservative party's economic policy, by its sheer recklessness and irresponsibility, points to the fact that it has learned nothing and forgotten nothing. The Conservatives are ready to take this country back to boom and bust.
Who said that the Conservatives had made a mess during the 1980s? It was none other than the shadow Chancellor himself, who said, "Of course the Conservative party should be apologetic for mismanaging the economy."
The economy's growth rate is higher than under the Conservatives. We are tackling the productivity gap and this country's under-investment, and we are getting people back to work. We will not allow the new deal to be abolished, as the Conservatives plan to do. They have no policies for the economy's future. Their party would take this country back to boom and bust. Sixteen billion pounds of spending cuts and a return to boom and bust: the choice for this country has never been clearer.

Mr. Giles Radice: Is my right hon. Friend aware that the Treasury Committee will want to question him in detail about the pre-Budget report? From what my right hon. Friend said this afternoon, it is clear that he has managed to combine very welcome increases in pensions with well-targeted help on fuel and sustained investment in education and health, and that he has done that without putting at risk the great prize that we have achieved of economic stability. Will my right hon. Friend confirm that he will maintain fiscal discipline and that he will not put any strain on Britain's very successful monetary policy?

Mr. Brown: I accept what my right hon. Friend said. He is Chairman of the Treasury Committee and I look forward to discussing these matters with him. Of course, the balance between monetary and fiscal policy decides the strength and growth rate of the economy. As the figures show today, we are running a surplus, repaying £28 billion of debt, and the fiscal stance is tighter or as tight in every year for the next few years, as set out in the Budget.
Of course, the Bank of England must make its own monetary policy decisions, and I look forward to hearing what it says when it makes the decisions tomorrow. The important thing is that by combining a tough fiscal policy with an independent monetary policy, we have moved this country from a permanent relapse in every cycle into boom and bust to a cycle that is capable of greater stability. I hope that even Conservative Back-Bench Members support what we have done to strengthen monetary policy in this country—as some do, I believe.

Mr. Matthew Taylor: Hon. Members may have noticed that today's statement was


not so much a pre-Budget consultation as a mini-Budget in its own right. The Chancellor's Labour predecessors introduced mini-Budgets in times of financial crisis precisely because of boom and bust, whereas the right hon. Gentleman introduces them at times of political crisis to bring in policies of bust and boom. Three years of cuts in public service are followed by a general election splurge to buy back the electorate.
The iron Chancellor has buckled in the face of protests from pensioners, Liberal Democrat Members and, indeed, some Labour Back Benchers, who said that he was wrong. The shadow Chancellor is wrong to ask for an apology for the fuel tax increases that his own party introduced. He should have asked for an apology for the measly mean-minded 75p on pensions that the Chancellor introduced only a matter of months ago. Today, the Chancellor has effectively had to admit that he was wrong to do that.
The Chancellor has left even more pensioners reduced to having to claim on the means test. For all the real pension increases that he announced today, which we welcome, he will leave millions of pensioners to the indignity of means tests. His so-called transitional announcement amounts to two years in which pensioners will get above-inflation pension increases only to go back to 75p inflation-based increases thereafter. That is the reality of the policy announced today, which is a policy of more means tests. Do not pensioners need real investment in long-term pension increases?
On fuel, the Chancellor must be aware that the policies that he introduced today are, lock, stock and barrel, those that we have been urging on him and his Conservative predecessors for nearly eight years. We have to wonder why those changes are coming now that the Chancellor faces a general election and fuel protests, rather than as part of a long-term strategy. He is not an iron Chancellor, but a Chancellor who buckles in the face of politics. That is no wonder, as the real hat that he is wearing today is the hat of the chairman of Labour's general election campaign.
Of course, some of the measures for business are welcome, but it is odd that there is total silence on the one issue that is really causing a crisis in British manufacturing and British farming—the high level of the pound. There was not a policy or a promise to help either of them.
Even after all the hype about this pre-Budget report—which was announced to the press 72 hours in advance and rolled out in the House of Commons as an afterthought—the Chancellor will still have spent in this Parliament less of the national cake on education and health than the Conservatives did, and will leave more pensioners reduced to the indignity of the means test. He has not had the guts to admit that his policy on pensions was wrong. Even today when he reversed it, he did not have the guts to apologise.

Mr. Brown: I do not know where the Liberal Democrat spokesman stands. He accuses me of buckling under pressure, including pressure from him, by giving away too much, and ends up telling me that I am giving away too little. He will have to work out what his position is on these matters. No doubt his position in one part of the country will be for more, and in another part it will be for less, as is usual with the Liberal Democrats.
On the specific issue of pensions, the Liberal Democrat spokesman—the champion of pensions—should remind himself of what he and his party said at the general election.

Mr. Taylor: That was the last century.

Mr. Brown: That is right: the Liberal Democrats are living in the last century. Their 1997 manifesto said that the basic state pension would remain indexed to prices. The hon. Gentleman should congratulate us on what we have done, rather than condemn us.
As for our adopting Liberal Democrat policies, one which we have not adopted, and about which I do not hear him talking much when he speaks every week on economic matters, is the road fuel duty escalator of 8 per cent. a year in real terms. [Interruption.] The hon. Gentleman shakes his head. Presumably that is a policy for inner-city areas only, not for rural areas.
Having heard the Liberal Democrat spokesman today, I suggest that he works out whether he thinks we have given too much or too little, because he cannot make up his mind.

Mr. Peter Kilfoyle: Earlier, I asked whether there was a doctor in the House, because I have never seen so many sick people as I saw on the Opposition Benches this afternoon while my right hon. Friend was speaking.
Will my right hon. Friend accept that from my political perspective this has been a welcome statement? Its implications for different parts of the country and different parts of the economy are far-reaching. It is innovative, and I applaud it. Does my right hon. Friend agree with me that, given the extraordinary statement from the shadow Chancellor, the choice facing the country has now been set? It is between investment in economic, social and human capital as set out in my right hon. Friend's statement, and the £16 billion of unspecified cuts proposed by the Conservative party.

Mr. Brown: I agree entirely with my hon. Friend. I know that he will welcome the measures we are taking for inner-city development and to create employment throughout the country in areas such as Liverpool. He is absolutely right that the country faces a choice between investing in our future or returning to the old stop-go, boom-bust of the past. Until the Conservative party, and the shadow Chancellor in particular, tell us where their proposed cuts will fall, the right hon. Gentleman will have no credibility either in arguing for tax cuts or in arguing that his is a coherent economic policy.
I remind the shadow Chancellor what the Leader of the Opposition said a few days ago—on the Jimmy Young show, of all radio programmes: "I have to present a coherent programme for government. It is my job to provide the country with an alternative government, not to ride around on whatever bandwagon from time to time. It is my job to present an alternative government, and that means we have to put forward a coherent programme." We are waiting for that coherent programme.

Mr. Kenneth Clarke: It gives me and others pleasure to hear the Chancellor continuing to use the language that he took over from the previous


Government of "no return to boom and bust" and "stability." However, will he stop using it? He presents two Budgets a year, when he comes along in response to the latest events to ensure that no lobby group is left unsatisfied, that no pressure group is unpaid and, on this occasion, that Barbara Castle and the hauliers are allowed their triumph—all in the hope that he gets re-elected. Will he confirm that the only reason why he can reconcile all that with his previous fiscal forecasts and his estimate that debt-GDP ratios would go down to levels that we have not seen since the boom phase of the late 1980s is that he and the Treasury keep getting wrong their forecasts of the revenue that they are receiving? Will he repeat his warning to the House that those revenue forecasts can change rapidly—overnight—and lead to very great disappointment?
Will the Chancellor take a little look beyond his hopes of being re-elected at the next general election and accept that—after three years in which he has increased the tax burden and reduced public spending to the lowest percentage of GDP since the 1960s—he has embarked on tax-raising potential and spending programmes that will far exceed any likely growth of the economy? Why will he not admit that that is unsustainable, and that a new Government will have to go back to the drawing board to recover those very qualities of prudent management that he sometimes affects to scorn even in the Government whom he succeeded?

Mr. Brown: I am always interested to hear the former Chancellor, usually because he is in total disagreement with the current shadow Chancellor about the way forward. As for the statements made to the House in the course of a year, it was the previous Government who—because of protests that people made quite rightly, and defeat in Parliament—had to come to the House and rewrite all their legislation on VAT on fuel. Therefore, he is not the one to comment on our introducing proposals over the course of a year.
I should have thought that, on his general point on economic management, the former Chancellor would have been in agreement with me that the stop-go policies of the 1980s were not the right policies for the British economy. I remember—I wish that I had brought the quotes with me—his own criticisms of those policies. As he himself has admitted, in those times, excessive tax cuts were made in one year that could not be afforded in every year. There was also a neglect of investment in the supply side, so that, as the economy grew, we could not sustain the growth that we wanted.
Equally, the former Chancellor, as a supporter of independence of the Bank of England, knows that the lack of a tough and tight monetary policy that is absolutely explicit about where we are trying to go is another recipe for a return to the situation that we had in the 1980s.
I believe that, on those three matters, the former Chancellor and I would share common ground—if it were not for the fact that he also thinks he is preparing for a general election.

Hazel Blears: I congratulate the Chancellor on the measures that he has announced today. His measures will help to bring long-term prosperity to

inner-city areas, which is in marked contrast to the years and years of dereliction caused by Tory policies. I also know that my right hon. Friend believes, as I do, that the future for inner cities lies in enterprise, not welfare, and in getting local people involved in their own companies, thereby bringing life to our inner-city areas.
Will my right hon. Friend confirm that the measures—all those incentives—that he has announced to encourage business, research and development and enterprise will be targeted particularly at some of our poorest and most deprived communities, to encourage them to share in the prosperity that is available to the rest of the people in Britain?

Mr. Brown: I am grateful to my hon. Friend, and I applaud the work that she does in securing regeneration in her own constituency and in the areas surrounding it. It is very important to recognise that the combination of public spending and targeted tax incentives will be necessary for the regeneration of areas which for too long have been left behind, and for people and places that have been too long forgotten. It is not only the measures that I have announced today but the measures that were announced in the public spending review that will give additional money to some of the hardest hit areas, so that they can meet higher standards in education, create more business development and, consequently, create more employment.
I believe that the challenge for the Government—having cut unemployment in the past few years and increased the numbers of people in employment by 1 million—is to go further. In every area of this country where there is still unemployment that is avoidable, we want with our measures to take the action that is necessary so that full employment becomes a reality for every region of this country.

Mr. Dafydd Wigley: I generally welcome the Chancellor's statement, but should like to deal with a couple of matters. First, I urge him not to get too rigidly locked into the perpetual surplus to which he referred, as there may be times in the economic cycle when he needs to be free of such a commitment.
Secondly, a moment ago, the Chancellor mentioned regional policy. Will he clarify whether there will be consideration of operating aids—particularly within objective areas such as Wales, Merseyside, South Yorkshire and Cornwall—to help secure inward investment into those areas? Will he also give an assurance that that package will be helpful for people in work but on low incomes, to increase GDP per head, which is a real challenge in so many areas?

Mr. Brown: Only a few weeks ago, I had the privilege of visiting Wales and talking both to the Welsh Pensioners organisation—I had a very interesting and constructive meeting with its members—and at a seminar of entrepreneurs and local authority leaders who were planning the next stages of the development of objective 1 projects. I consider that both the enthusiasm and the determination to make the projects work stands Wales in good stead for the future, and we want to back them up in whatever ways we can.
Extra money is available for the new deal in areas where unemployment is still high. The working families tax credit is the main means by which we can make


work pay—as the right hon. Gentleman is asking us to do—in a part of Wales in which, in the past, a large number of people have been either on the minimum wage or just above it. The working families tax credit is specifically designed to make work pay.
The right hon. Gentleman asked about the level of regional development incentives provided by both the British Government and the European Union. We will do what we can to ensure that regional development in every part of the country can move ahead. The fact that the regional development agencies are today being given new powers and new flexibilities is a measure of that—and, of course, they were given new money in the July spending review. As the right hon. Gentleman knows, Wales was given a 5.4 per cent. real-terms increase in expenditure, not least to meet the needs of objective 1 areas.

Mr. Barry Jones: After 18 years of Conservative Governments, this was a report worth waiting for. It used the language of social justice, and it also shot a good many Tory foxes.
I particularly welcome my right hon. Friend's ingenious approaches to the pensioner, the haulier and the farmer. In Deeside and throughout Wales, the increase in the basic state pension will be widely welcomed as a measure of social justice. May I say that we want the right hon. Gentleman to say loudly throughout the land that there is a choice between this report and £16 billion worth of cuts in public services?

Mr. Brown: I entirely accept what my right hon. Friend says. I know that he is a long-standing fighter for the needs of the pensioner community, as well as for the industrial needs of his constituency.
My right hon. Friend is absolutely right: the country will face a choice—the choice whether to invest in the future, or return to the stop-go of the past. The choice is whether we are prepared to make money available to expand our public services and help pensioners, or whether we are to return to a Conservative agenda that would cut a massive £16 billion from our public services.
The shadow Chancellor himself admits that that is the record of the Conservative party—a record that he is having to defend. As he said in his lecture to the Tory party conference in October 1997 that Tories were linked to harshness, thought to be uncaring about unemployment, poverty, poor housing, discipline and single parenthood and that they were thought to favour greed and the unqualified pursuit of the free market, with a devil take the hindmost attitude, I do not need to add any more to those remarks about the Conservative party.

Mr. John Townend: Given the amount of the taxpayer's money that the Chancellor has had in his election war chest, does he accept that motorists in my constituency who must have cars to get to work, take the children to school and go shopping will be very disappointed by the parsimonious reduction of only 2p per litre? Will he confirm that the extra cost of sulphur-free petrol is 1 p a litre? Will he also confirm that he has put up the price of petrol by 15p per litre since he went into No. 11, and that, despite the latest reduction, our tax on petrol will still be the highest in the European Union? The right hon. Gentleman has proved today that he is an anti-motorist Chancellor in an anti-motorist Government.

Mr. Brown: I do not think that the hon. Gentleman heard the shadow Chancellor say that we had been far too

generous. It is difficult to know what the Conservative party's position on these matters now is. Perhaps the Conservatives should call another meeting of the No Turning Back group, and try to reach a conclusion on whether they can agree on anything nowadays.
I have been following the hon. Gentleman's comments with considerable interest. It was he who said in the House two years ago, after that pre-Budget statement,
I believe that, in the United Kingdom, despite the Chancellor's optimism about growth next year, we face recession—[Official Report, 4 November 1998; Vol. 318, c. 913.]
I will think twice about whether to listen to all the advice that I receive from the hon. Gentleman in the future.
As for the cost of travel, I believe that motorists in the hon. Gentleman's constituency and throughout the country will welcome the fact that, while we are maintaining a very tough fiscal discipline—indeed, we are repaying £28 billion of debt this year, and have reduced the debt ratio to 30 per cent.—we are still able to help the transport and haulage industries. I wish that the hon. Gentleman had welcomed the justice for pensioners from which thousands of his constituents will also benefit, despite his failure to advocate their case.

Mr. Derek Twigg: I welcome my right hon. Friend's statement today. Constituencies such as mine were ignored by the previous Tory Government, but it is clear that they will benefit from today's further redistribution of wealth, which will devote more resources to those who need it most.
Pensioners in my constituency accept that this Government have done more than the Tories, but they expect more from us because we are Labour. They have got more today, which is why I welcome the statement.
Land in my area suffers badly from chemical contamination. My constituents will welcome the acceleration in tax relief that my right hon. Friend announced today. When he talks to my right hon. Friend the Deputy Prime Minister, will the Chancellor ensure that areas where there is chemical contamination of land get priority in that respect?

Mr. Brown: My hon. Friend describes the measures that he would like my right hon. Friend the Deputy Prime Minister and me to take up, and we will certainly examine what he proposes. We welcome what he says about the urban regeneration measures. I believe that we are tackling the problem in a way that will bring results.
I also welcome what my hon. Friend said about pensioners in his constituency. Our aim is to ensure that every pensioner shares in this country's rising standard of living. We know that the world has changed over the past 50 years, and that different groups of pensioners have different needs. We will raise the basic pension by £5 a week from April next year and by £3 a week the year after, and we also intend to raise the winter allowance. Our new proposals are very important, as they will do more than a restoration of the earnings link would do for those pensioners who need the help most and whose savings must be rewarded.
I hope that my hon. Friend will join me in getting that message across to the country.

Mr. Quentin Davies: Does the Chancellor believe that he has managed to abolish the


trade cycle somehow? If not, what would happen if a recession occurred while the right hon. Gentleman was still Chancellor? Would he carry on with his supposedly immutable spending plans and run into uncontrollable debt, or would he have to introduce no doubt very massive tax cuts?

Mr. Brown: I am grateful to the hon. Gentleman. I understand that he is an Opposition Front-Bench spokesman, but his line seems completely different from that expressed by the Leader of the Opposition yesterday morning. The right hon. Member for Richmond, Yorks (Mr. Hague) said that there was more money around and that the Government should be spending it. He also said that today's announcement would not do enough, but today the hon. Member for Grantham and Stamford (Mr. Davies) says that we have done too much. The Opposition really must decide what their position is.

Mr. Davies: Answer the question

Mr. Brown: I do not know whether the hon. Gentleman heard me say that we had taken action, and that our surpluses and fiscal disciplines had left this Government better prepared than others in the past for the ups and downs of the economic cycle.
Of course economic cycles occur—growth is higher in some years than in others. However, we must avoid the mistakes by those members of the Conservative party who were in charge of macro-economic policy in the 1980s. They pushed the country into a violent recession in the early 1990s, when growth collapsed, because they had not invested. The previous Conservative Government made tax cuts that they could not afford, and they had no monetary or fiscal discipline.
The hon. Gentleman supported the independence of the Bank of England long before Opposition Front-Bench spokesmen even considered doing so. I hope that he, like the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), will recognise that the Government have brought a monetary and fiscal discipline to the conduct of economic policy that did not exist in the 1980s. Because that discipline did not exist then, the country suffered from the policies of boom and bust that I have described. The hon. Gentleman supports the independence of the Bank of England: he should also support the Government's fiscal rules.

Mr. Stuart Bell: As Second Church Estates Commissioner, and on behalf of the Church, may I welcome my right hon. Friend's statement that VAT on church repairs will be cut from 17.5 per cent. to 5 per cent? I do not want to appear in any way bipartisan, but the campaign to reduce that charge has been all-party and has gone on for 30 years. I welcome the fact that my right hon. Friend is the first Chancellor in 30 years to have listened to the Church's representations.
Will my right hon. Friend devote his energies and endeavours to ensuring that any European Union directive that has to be modified or promoted in respect of the proposal comes into force as soon as possible, so that the VAT payable can be reduced?

Mr. Brown: I am grateful to my hon. Friend, who does a tremendous amount of work as a Church Commissioner.
I applaud the case that he has made for those changes; I know, too, that it is an all-party campaign. We will push the European Commission for a change in policy. We recognise that although churches receive money from the lottery and from other funds, particularly from the Department for Culture, Media and Sport, they have bills that must be met, in some cases in areas where they cannot raise money easily from charitable donations. We therefore want to do what we can to help.
It is part of our policy to preserve and advance community life in areas in which there are old buildings that should be kept in existence and undergo the necessary repairs. I have met the Archbishop of Canterbury to talk about these matters and we will continue to talk to the churches. It is our determination that they will have the additional money that is needed.

Rev. Ian Paisley: I welcome many of the things that the Chancellor has said today, especially about pensions. I am sure that pensioners will be well pleased with what they have heard. Of course, pensions are a continuing problem, and I am glad that the Chancellor has gazed into the future.
People in Northern Ireland are a bit aggrieved with the Chancellor. They feel that in matters of consultation, other parts of this United Kingdom have been listened to, while our farming community and the freight men did not get direct access to him.
The right hon. Gentleman has been on wheels. Northern Ireland is not so very far from his own country—it is just 20 miles over the sea, and there is a very good boat service, as he knows. As he carries out further consultations, will he—even if he cannot come himself—meet a deputation of farmers and freight men? The Chancellor talked about a virtuous circle. The farming community and the freight men in Northern Ireland are in a vicious circle.
Northern Ireland is the only part of this United Kingdom that has a land border with another country in the European Union. The number of men and women who have lost jobs on the border because of the price of petrol is fantastic. All one sees driving along the border is closed filling stations. Of course, the farming community—

Mr. Speaker: Order. I am sorry to interrupt the hon. Gentleman, but he must understand that other hon. Members wish to speak. I think that the Chancellor has enough to work on.

Rev. Ian Paisley: May I just say in closing, Mr. Speaker, that the farming community and the freight men need the Chancellor's attention?

Mr. Brown: I am grateful to the hon. Gentleman for putting the case for the farmers and the haulage industry. The pre-Budget consultation will include visits to every part of the United Kingdom. Ministers will be visiting Northern Ireland and will listen to the concerns of farmers and hauliers. My good friend the Secretary of State for Northern Ireland has already invited me to come across to Northern Ireland to talk about some of those matters.

Ms Oona King: I thank the Chancellor for the equivalent of a cut of 4p per litre of fuel for drivers of smaller cars, such as myself, through the car tax discount of £55.
On pensions, is not the shadow Chancellor correct on one point, but one point only? Pensioners will not forget what the Government have done, because the Government have increased their incomes, particularly for the poorest and those with modest occupational pensions and savings.
Many pensioners in my constituency have asked me about the winter fuel allowance of £200. Can my right hon. Friend let them know the latest date by which pensioners in Tower Hamlets and across the country will have that cheque for £200 in their pockets?

Mr. Brown: The cheques will start going out on Monday. The intention is that they will be paid over November and reach people before Christmas. That is what we are trying to achieve.
On the general policy on pensions, I should have thought that there would have been all-party support for the view that, first, we should tackle pensioner poverty. By raising the minimum income guarantee, we are taking hundreds of thousands of pensioners out of poverty. Just as we want to make child poverty a thing of the past, we want to make pensioner poverty a thing of the past. That is possible through the actions that we take.
I recognise, however—and this is the second stage of our reforms—that we must help people who have saved all their lives and who get nothing from the system. It is all very well the shadow Chancellor criticising measures that he says are income related. Those are measures that encourage and reward saving—they tell people who have saved all their lives that we will do more to help them.
When people consider the proposals and look at the scale of the payments that can now be made, they will realise that the pensioner credit is a means by which we can give justice to middle and lower income pensioners and at the same time tackle the problem of pensioner poverty.
I hope that my hon. Friend's constituents will get the cheques that will start to go out from Monday. Equally, I hope that they will support our new pension reform proposals.

Mr. David Prior: Can the Chancellor of the Exchequer explain why he has so little trust in pensioners to spend their own money? Why cannot the winter fuel allowance, the Christmas bonus and the free television licence fee be incorporated into the basic state pension?

Mr. Brown: First, the £200 winter allowance, which I assume that the Conservative party would not pay—[Interruption.] That is an interesting revelation. We have now had an admission that, even this year, the Conservative party would not pay the winter fuel allowance—even before the Conservatives get into power, they say that they would not pay it this year. I am sorry that attendance in the Chamber is low at the moment, but hon. Members here will note, as will everyone throughout the country in the next few days, that the Conservatives would not even pay this year's £200 winter allowance.
As for telling pensioners how to spend their money, we are giving pensioners that money to spend. The difference between the two parties is that the Conservatives would not even give pensioners the money.

Mr. Martin O'Neill: I congratulate my right hon. Friend on his statement, in particular on what he

intends to do about vehicle excise duty. The rural poor, who drive on average perhaps 8,000 miles a year, will benefit far more from a £55 cut in that duty than they would have benefited if he had simply cut the price of petrol. We are doing the right thing—enabling people to pay as they go when they drive. We are cutting the cost to drivers of getting on the road. That will help the poorest people and it will allow the rural poor in particular to drive as they need to do. Many of them have limited needs, which we should not exaggerate—they need their cars, but not for long journeys, and not on the scale that they would need them if petrol tax were cut as dramatically as some people have advocated, which the country could not have afforded and which would have denied money for schools, pensioners and other things.

Mr. Brown: My hon. Friend is the Chairman of the Select Committee on Trade and Industry and has been taking evidence on the matter. I know how vigilant he is when he represents the needs of his rural as well as his urban constituents. The important point is that for the past 20 years those in rural areas have been calling for tax on the ownership of a car to be less and saying that people should not have to pay such a high licence fee. Now that the new lower fee has been extended to cover vehicles up the cc scale to 1500 cc people have a real choice as to whether to pay the lower fee.
Our policy was based, first, on getting rid of the deficit, secondly, on ending the under-investment in transport and, thirdly, on doing nothing to hurt stability. Our fourth and fifth objectives were to meet the environmental needs that we have set down and to tax ownership less and treat motorists more fairly. Taken as a whole, the measures today achieve those aims.

Mr. William Ross: The Chancellor will no doubt be delighted to hear that I agree with his strictures on spending temporary surpluses as though they were permanent features. I welcome the fact that he is spending at least part of the temporary surplus on repaying public debt and I hope that he will continue with that course until the public deficit is eventually eliminated. Does he agree that the fatal flaw of the Conservative party when in government was not that it undertook that course of action but that it entered the exchange rate mechanism? Those of us who objected to that policy object equally to any possibility of our entering the single currency.
That said, the measures that the Chancellor announced on the cost of fuel will go nowhere near meeting the real problems alluded to by the hon. Member for North Antrim (Rev. Ian Paisley) in respect of the border with the Irish Republic, where filling stations and many other businesses have suffered grievously. Much more will have to be done. Will the Chancellor give an undertaking that he will pay serious attention to that problem, and that the bill imposed on foreign lorries will also apply to hauliers from the Irish Republic?

Mr. Brown: We continue to investigate cross-border flows of petrol and diesel. Customs and Excise has been concerned about that and we shall keep it under review.
I shall not be drawn into a debate on the single currency, but simply repeat that our policy is—as it has always been—that in principle we see benefits in the single currency; in practice, the tests that we have set must be met.
As for the Conservatives learning the lessons of the past, one sees total opportunism from them; every time we make a spending announcement, they say that it will cause a recession, but when it fails to do so, they ask—on the day before the announcement—for huge sums of money to be spent. They have shown complete opportunism in this effort too. Neither Front-Bench nor Back-Bench Conservative Members have a clue as to what the Conservative policy or attitude is. They were certainly no wiser after hearing the shadow Chancellor.

Mr. Dennis Skinner: Is the Chancellor aware that it is a pleasure to hear a Labour Chancellor setting out a long-term policy that will show, at the general election, that for the first time there will be fewer people on the dole under a Labour Government than when they came into office? That policy means that we are planning to spend money—unlike the miserable years of 1978–79, when a Labour Government cut public expenditure.
As my right hon. Friend is probably aware, last week I called for money for jobs in the regions and a big chunk of money for the pensioners. It would be churlish of me not to say thank you. We have a listening Government—especially to me. The Tories should be more inclusive; they should thank the Chancellor too, because he has reduced the tax on the Leader of the Opposition's flat-back lorry.

Mr. Brown: I think that the Leader of the Opposition has got rid of his lorry; he does not seem to be going about the country as much as he did in the past. [Horn. MEMBERS: "It has broken down".] It has broken down—like his party's policy.
My hon. Friend referred to jobs. We have created 1 million jobs, but that is not enough. We must do better and we will do more. We can help many people back into work through the new measures under the new deal that my right hon. Friend the Secretary of State for Education and Employment is pushing forward.
My hon. Friend has been a champion of pensioners over the years—especially in putting their case to me and to others. He thanks us for our efforts for pensioners; we should recognise that he has been a champion of their case. He says that he likes to support Labour Chancellors; I shall report that remark to one of our colleagues in the House of Lords.

Mr. John Redwood: The Chancellor has been bruised and battered by the haulage industry and by the protests calling for fuel tax cuts. Now that he is the U-turn Chancellor, will he make a further U-turn to abolish the hated IR35 in order to help the high-tech industry? Will he do a U-turn to help home owners by cutting stamp duties that he raised much too far? Will he apologise to pensioners for the big increase in taxes on them? Is it not true that, even after the statement, he is still the rip-off Chancellor in a rip-off Government?

Mr. Brown: Here it is: the shadow Chancellor saying that there should be a bit of prudence from the Conservative party and then someone who would like to be shadow Chancellor—perhaps he would like to be the

party leader—saying that we should lose lots of tax revenue from IR35 and other measures. I do not know what the policy of the Conservative party is.
The right hon. Member for Wokingham (Mr. Redwood) is still a member of the No Turning Back group, so he is fighting his corner for the right-wing cause. He has always said that public spending increases would cause a recession; the only problem is that he is wrong.

Mr. Ian Pearson: May I congratulate my right hon. Friend on his statement? In particular, I welcome his comments on manufacturing and the proposals for the abolition of the withholding tax, the introduction of intellectual property and goodwill relief and for small business VAT simplification. I am sure that they are all measures that will be welcomed by industry.
Will my right hon. Friend tell us whether the stamp duty exemption in deprived areas will apply to all property types and not just residential ones? Will he consider extending the VAT reduced rate for churches to other types of property in deprived areas? Why do we have to wait until 2003 for the pensioners credit?

Mr. Brown: My hon. Friend has asked many questions. Detailed proposals are being published today for consultation, and I hope that he will join that consultation. He has been a great promoter of economic development in his region and he has had ideas that the Government have accepted in some cases because they were excellent proposals for industrial regeneration throughout the whole country. I ask him to examine in detail the proposal for stamp duty relief, which is worth about £120 million for industrial regeneration.
On VAT on churches, we are considering the matter of public buildings as a whole. On my hon. Friend's question about 2003, the pension arrangements will give a rise above inflation in basic pensions for the next two years. When we introduce the system in April 2003, we will get it right so that tax and benefit integration move forward. That is why the system will be introduced in 2003.
On my hon. Friend's general point about industry, I forgot to remind the House that the one of the last statements made from the Front Bench by the right hon. Member for Wokingham, the former Secretary of State for Wales was, "The Government are losing control of the economy." Once again, the right hon. Gentleman got it wrong.

Mr. John Bercow: Given that 99.6 per cent. of British businesses employ fewer than 100 people, that they account for 57 per cent. of the private sector work force and that they generate approximately two fifths of our national output, why is the Chancellor so proud of the fact that he has done nothing whatsoever today to reverse the tide of regulation which, thanks to him, is now deeper and more hazardous than any that British companies have ever faced?

Mr. Brown: First, we have taken measures to help small businesses. The hon. Gentleman has obviously not looked at the detailed documents or obtained them from


the Library, which is not out of character for him when he asks a question in the House. He should look at the documents and he will find—

Mr. Bercow: I have studied them.

Mr. Brown: Oh, the hon. Gentleman has studied the documents. Well, there is a VAT simplification scheme and it affects up to 50,000 businesses. We have cut small business tax, and he should recognise that fact.
As for the burden on business, the VAT scheme is a deregulation scheme; it is designed to simplify the system. I also remind him that the shadow Chancellor said of the Conservative party's record on regulation, "We were rather notable regulators. We passed volumes of new rules and laws, interfering with almost every aspect of business and social life." Perhaps, many of the hon. Gentleman's complaints are directed on this, as on other issues, to those sitting on the Opposition Front Bench.

Mr. Robert Sheldon: Is my right hon. Friend aware that his careful management of the economy over the past three years has produced the brightest economic prospects for more than a generation? Will he make sure that his prudence with a purpose will now move a little more towards the purpose that he had in mind and, in particular, towards the investment and productivity that I know that he has very much at heart? They are important for the long-term future of his plans, which I hope to see realised.

Mr. Brown: I am grateful to my right hon. Friend. He was a Minister in a previous Labour Government and is always a strong defender of manufacturing industry. His speeches on the economy are always listened to by the House.
I agree that productivity is the central issue that we must address with work forces and managements. In many sectors, the issue is not what Government can do, but how management and work forces can tackle together the problems in skills and restrictive practices that they must address and how they deal with the areas in which new

technology must be introduced. However, as I said to the TUC and the CBI, to whom I have spoken in the past two months, we must continue to address such problems. I believe that over the next few months, my right hon. Friend will see a number of initiatives in skills, benchmarking, management training and the introduction of new technology. A great deal more work is being done so that we can rival the world's best.

Mr. John Wilkinson: Was it political prudence or his economic judgment that led the Chancellor not once to mention the euro in his original statement? Was it because the economy is doing much better outside the eurozone than it could ever do within it, or is it perhaps because he was frightened that the voters would be scandalised were he to admit that he is wasting inordinate sums of public money on the changeover plan to the euro when, for example, my constituents have to endure interminable delays on the tube, and face the closure of the premier heart hospital in the United Kingdom, Harefield?

Mr. Brown: In that case the hon. Gentleman will be pleased that I talked in my statement about the health service, transport and all the other issues that relate to public services. Only the hon. Gentleman thinks that every debate in the House of Commons must be about the euro. Today we are debating public services and the pre-Budget statement.
As for European measures, I made a number of proposals for European economic reform to Finance Ministers this week. We published our updated report on euro preparations, and we will continue to pursue the policy of prepare and decide. The hon. Gentleman must make up his mind whether he agrees with the official policy of the Conservative party, which is not to be against the euro in principle, or whether he will hold to his own position, which is always to be against it, under all circumstances. He will find, of course, that the shadow Chancellor has not made up his mind on that either.

Several hon. Members: rose—

Mr. Speaker: Order. Unfortunately, we must move on.

Lifelong Learning (Paid Study Time)

Mr. David Chaytor: I beg to move,
That leave be given to bring in a Bill to establish an entitlement to a national minimum time allowance for training and educational purposes for people in employment.
It is particularly appropriate, in view of the report published a few days ago by the National Advisory Council for Education and Training Targets, that I have the opportunity to present my Bill. The report paints an interesting picture of the level of skills in the United Kingdom and, in particular, compares them with the skills of our major competitor countries. In light of the Chancellor's pre-Budget statement and the emphasis that he placed on raising productivity levels in British industry, it is relevant that my small Bill contains a proposal that would take a small but significant step towards achieving those higher levels.
During the past three years, the Government have significantly improved post-16 education and training in the UK. No Government in my lifetime—or, I would argue, this century—have put as much emphasis on the importance of post-16 education and training, lifelong learning, vocational training and retraining, as the current one. Following the important commissioning of the reports by Professor Fryer and Baroness Kennedy; the publication of the Green Paper "The Learning Age" and the White Paper "Learning to Succeed"; the measures contained in the Teaching and Higher Education Act 1998, which restored the important right of young workers to have day release once a week; and, more recently, the Learning and Skills Bill, which consolidates the multifarious streams of funding for post-16 education and training, we now have a framework for the delivery of lifelong learning that we have never had before. The two major colleges in my constituency have certainly benefited from the record investment that is being put into further education and vocational training.
However, in welcoming the importance that is now being attached to lifelong learning and the new investment in it, we must not underestimate the scale of the problem of a work force who are significantly less well trained and well qualified than our major competitors. That is why our productivity levels compare poorly with those of France, Germany, Japan, the United States and, indeed, many south-east Asian countries, and why we cannot shake off the problem of skills gaps and skills shortages.
The recent report by Sir Claus Moser suggested that 20 per cent. of the adult work force in the UK have serious literacy and numeracy problems. In Britain, fewer than half of all adult workers have qualified at national vocational qualification level 3 or above. In Germany, it is almost two thirds. In Britain, one quarter of workers do not have a single level 2 qualification. Let me clarify: that does not mean a full NVQ level 2, or five GCSEs at grades A to C; it means a single component of those level 2 qualifications—a single GCSE or a single NVQ2 module. Among older workers, the problem is more serious: one fifth of workers aged more than 50 have no formal qualifications at all and almost two fifths do not have a single qualification at level 2.
We must avoid the tendency to assume that those without specific job qualifications or general educational qualifications are inadequate in their jobs. However,

the reality is that the rapidly changing labour market brought about by the impact of new technology and globalisation means that the number of people without formal qualifications and the number of jobs available requiring only very low-level skills are diminishing day by day. Therefore, the skills level of the labour force is not only an issue of productivity and competitiveness, but one of economic survival for the unskilled and their families. I would argue that a national minimum entitlement to training will, in time, be seen to be of equal importance to the national minimum wage.
The problem in Britain is not necessarily that we do not invest enough in vocational education, but that we do not get the best return for the money that we do invest. The most recent survey indicated that British industry provided 49 million days of training annually, at a cost of more than £10 billion. However, the distribution of that training is heavily skewed in two directions. First, larger firms are understandably better than smaller ones: the skill needs in Britain survey showed that more than 90 per cent. of firms with more than 200 employees provided on-the-job training, whereas only 20 per cent. of firms with fewer than 25 employees did so.
Secondly, the lion's share of training is taken by graduates and equivalent professionals. The recent labour force survey showed that almost 20 per cent. of those with level 4 qualifications had benefited from training within the previous four weeks, compared with little more than 5 per cent. of workers classified as "operatives". Therefore, those unskilled and semi-skilled workers who, as schoolchildren, were victims of a divisive and selective system of education find that, in the workplace, they are still at a disadvantage in terms of the training opportunities available. Training opportunities tend to be allocated to the cause of increasing the skills of those who already have higher levels of skill, at the expense of the unskilled and semi-skilled.
Other countries do things differently. Our major competitors realise that, these days, no nation that wants to prosper in the knowledge-driven economy can afford to be so casual or so elitist about the development of technical skills as the United Kingdom has been in the past. Let us remember that British industry invests more than £10 billion in approximately 49 million training days a year—an average of about 2 days for every adult of working age. Yet, despite that average allocation, millions of our workers have no access to training of any sort.
Many of our major competitors ensure that all workers benefit from training opportunities by establishing a national minimum allocation of training hours, or a right to paid leave for training purposes. Such schemes exist in Norway, Netherlands, Sweden, France, Italy, Belgium and Greece. In the United Kingdom, where 20 per cent. of adult workers struggle with basic literacy and numeracy and there are fewer than two thirds the number of workers with higher technical qualifications that there are in Germany, and bearing in mind my right hon. Friend the Chancellor's call for higher productivity in his pre-Budget statement today, there is a powerful argument in favour of introducing a basic entitlement to training for everyone.
Quality and quantity of vocational training in Britain is not a new cause of concern: it was identified as a serious national weakness more than 100 years ago by a royal commission and it has been the subject of continuous debate ever since. The publication of the "Aiming Higher" report by the national advisory council reinforces the


message about the gap between skills in Britain and skills in our major competitive countries. Yet structures that had been patiently built up in the post-war period—industrial training boards, day release for young workers and the training levy—were demolished in the 1980s, along with the remnants of the old apprenticeship system. I am proud that the Labour Government are now developing a modern system of vocational training that will significantly increase opportunities for millions of young people in this country.
The thrust of the Government's new initiatives is, to a large extent, focused on expanding the supply of training, but I would argue that the British problem is not primarily a lack of supply, nor a shortage of training in aggregate terms. However, there is a distortion in the demand for training, and a skewed distribution of training that serves to increase the skill of the already skilled and to neglect the needs of the unskilled. The longer that happens, the wider our skills gap will be.
If we want seriously to tackle the problems of the low level of skills in British industry, the skills gap and the skills shortages, we must approach the problem from the demand side of the equation. That is why I believe that the establishment of a national training entitlement—building on the success of the national minimum wage—which is expressed in terms of an annual minimum number of hours of paid training time for every individual in employment is the most effective way of ensuring that the opportunities opened up by the Government's massive new investment in lifelong learning will be available to people in all walks of life. There will be vocational training for the many, not only for the few.
The national minimum wage established the right to earn. The national training entitlement would establish the right to learn. I commend the Bill to the House.

Question put and agreed to.

Bill ordered to be brought in by Mr. David Chaytor, Charlotte Atkins, Mr. Hilary Benn, Mr. John Cryer, Mr. Kelvin Hopkins, Mrs. Alice Mahon, Judy Mallaber, Mr. Gordon Marsden, Mr. Allan Rogers and Ms Debra Shipley.

LIFELONG LEARNING (PAID STUDY TIME)

Mr. David Chaytor accordingly presented a Bill to establish an entitlement to a national minimum time allowance for training and educational purposes for people in employment: And the same was read the First time; and ordered to be read a Second time on Friday 17 November, and to be printed [Bill 178].

Orders of the Day — Trustee Bill [Lords]

Not amended in the Standing Committee, considered

Order for Third Reading read.—[Queen's consent, on behalf of the Crown, and Prince of Wales's consent, on behalf of the Duchy of Cornwall, signified].

The Parliamentary Secretary, Lord Chancellor's Department (Mr. David Lock): I beg to move, That the Bill be now read the Third time.
I shall be extremely brief. This is a Law Commission Bill, which has been received with approval by right hon. and hon. Members on both sides of the House. It has been thoroughly debated both here and in another place. It provides for the reform of the law of trust, especially as it relates to the powers of trustees to invest trust funds in default of the inclusion of express powers of investment in the will or trust instrument. In England and Wales, it recommends a range of reforms that is intended to facilitate more effective trust administration in areas including collective delegation by trustees, the use of nominees and custodians, powers of insurance and the remuneration of professional trustees. The Bill has been widely welcomed by the great majority of commentators. Those with reservations have, in the main, wanted the Bill to do more. Few have objected to what it does achieve.
The Bill will be of substantial benefit to beneficiaries of trusts, including many charitable trusts. As I have said, it has already been debated at length. There was a long debate on Second Reading and extensive consideration in Committee. I commend the Bill without further explanation.
My noble Friend the Lord Chancellor and I are grateful for the generally constructive atmosphere in which debate on the Bill has been conducted, both here and in another place. In many respects, it has been a model of the way to run uncontroversial Bills, and I hope that it is a model to which we can return where appropriate in future.

Mr. Nick Hawkins: I confirm what the Minister has said about the way in which the Bill has been dealt with. Its passage has been relatively uncontroversial in another place and in Committee, both in the Second Reading Committee and in Standing Committee. However, one or two matters have been raised in another place, and in this place by my hon. Friend the Member for Eddisbury (Mr. O'Brien), who has given his apologies both to me and to the Minister for the fact that he is unable to be in the Chamber this afternoon.
The Minister will confirm that there was a relatively extensive debate in Standing Committee A on my hon. Friend's amendments in relation to clause 30 dealing with the remuneration of trustees of charitable trusts. My hon. Friend raised concerns that had been raised with him by the Institute of Chartered Secretaries and Administrators, and by others. Those points were similar to those that were raised by several Lords in another place.
Following Standing Committee A, the Minister wrote at considerable length both to my hon. Friend and to other members of the Committee. I should mention that my


hon. and learned Friend the Member for Harborough (Mr. Gamier) has dealt with the matter at all its Commons stages. I declare my interest as a member of the Bar, although I add, as most other Members in both Houses have done, that I have never pretended to be any sort of expert on trust law. However, like, I suspect, the Minister, I had to pass examinations on it as part of my Bar finals. I remember some interesting, arcane points about the Trustee Investments Act 1961, the weaknesses of which the Law Commission has sought to address in putting forward the proposals that led to the legislation.
I join Lord Kingsland, the shadow Lord Chancellor, in paying tribute, as many other Lords did, to the work of the law commissioner Mr. Harpum, who led the work that led to the Bill. I know that the Minister and the Lord Chancellor have similarly paid tribute to him in debates.
I return to the Minister's detailed letter, which runs to four and a half pages. We still have a concern, which I would like him to deal with. In his letter, he rejected my hon. Friend's arguments about issues relating to clause 30. It says:
Some have suggested that any such extension should be a matter for primary legislation. However, it should be noted that it is very difficult to find Parliamentary time for law reform legislation. The Law Commission always has a number of important Reports awaiting implementation and is restricted by the availability of Parliamentary time. As I am sure you—
meaning my hon. Friend—
are aware, the pressure on Parliamentary time is such that there is often a considerable time lag between the completion of a project and its eventual implementation by Parliament.
It goes on to set out the reasons why the Government chose to address the particular issues in the way that they did—by giving powers for secondary legislation.
The concern that I share with my hon. Friend is that it should have been possible for the Government to accept the thrust of his points in this primary legislation. We have repeatedly pointed out, both in the Chamber and in Committee, our concern that the Government are making a practice of giving themselves many more general powers to enact later delegated legislation. The Bill is perhaps only a small example of that, but given that amendments were tabled in another place by the Government—the Lord Chancellor tabled a number of amendments put forward by the Charity Commission, which were accepted by Members on both sides in another place—we think that there should have been time for the Minister to table amendments to meet my hon. Friend's concerns in the Bill itself. There was no particular time problem. We certainly do not have any particular time problem this evening. We think that, in the four-and-a-half page attempt to justify their position, the Government have got it wrong.
It is only a small point. We have given a general welcome to the Bill. Nothing that I say this evening should be taken to undermine that general welcome—the Bill is undoubtedly a welcome updating of trust law—but I hope that the Minister will try to give a better answer than he did in the letter.
We do not think that the Government have finished the job. It is always unsatisfactory when, in a short Bill designed to enact Law Commission proposals, the Government leave a gap. We believe that they have done

so on this occasion, and that the Minister's reply is inadequate. I speak not just for my hon. Friend the Member for Eddisbury, but for a number of those outside the House who are specialists in this field of law and who backed my hon. Friend's arguments in Committee and the same arguments when they were put in another place.

Mr. Alan Meale: While the Bill is before the House, I take the opportunity to highlight concerns that have arisen since my recent experience in dealing with trust law, with the help of the Parliamentary Secretary, Lord Chancellor's Department, my hon. Friend the Member for Wyre Forest (Mr. Lock).
I refer to three trusts centred on my constituency—the F. B. Bailey Thomas charitable fund trust, the F. B. Bailey Thomas provident fund trust, and the F. B. Bailey Thomas personal fund trust. The trusts were set up in 1970 to prevent a situation whereby, under the Mental Health Act 1959, the moneys from the trusts could be lost to the many workers employed at Mansfield Brewery. A considerable sum was involved—for all three trusts, a combined total of many hundreds of millions of pounds.
Another reason for the establishment of the trusts was to safeguard the independence of the Mansfield Brewery company and the interests, welfare and employment of the many thousands of people who work for the company.
As my hon. Friend knows, the trusts were run by a gaggle of people who served on all three trusts simultaneously. One of the members on the personal trust acted as the solicitor for all the trusts. The provisions of the trusts contained a rider to the effect that the shares in the brewery should not be sold unless that was in the interests of the beneficiaries, but members of the trusts decided on that while serving on all three trusts at the same time. A contract was awarded for private consultation with one of their own companies. Indeed, a senior trustee on two of the trusts was a senior director at Ernst and Young, which was involved with the trusts.
That is not a satisfactory situation. Despite all the work done by the Standing Committee, there are still tremendous gaps in trust law—for example, in the case of trustees serving on a number of trusts, all intermixed, and handling matters in which they have pecuniary interests. Conflicts of interest must inevitably arise. Mr. Nagel whom I mentioned as a director of Ernst and Young is an example. Another example is the solicitor who was a trustee and also acted as the solicitor for all three trusts.
Pecuniary interests were also involved when trustees who held shares in the company saw an opportunity to cash in those shares and took decisions that favoured themselves and their families to the tune of many millions of pounds. The Bill does not cover all those situations, as I have pointed out privately to my hon. Friend.
I am concerned also about the role of the public trustees. When these matters arose 12 or 14 months ago, I met the public trustees more than once. It seemed that they were intent on only one thing: allowing the sale of the shares on the open market. I pointed out to them that in the case of the provident fund, which was established to protect the welfare of the beneficiaries—people who used to work for Mansfield Brewery or still worked there, numbering about 3,200 in total—not a single one of the beneficiaries wanted the sale of shares to go ahead. Petitions were presented to the Public Trust Office,


the Minister and the company, showing that no beneficiary wanted any part of their shares sold on because it would put at risk their jobs. Nevertheless, the sale of those shares proceeded.
Other matters also caused much concern. For instance, of the many hundreds who applied for aid from the provident fund, which held millions of pounds, who had worked in the company for a number of years after 1970, nearly all were denied. They were told firmly by the trustees in charge at that time that the trusts were established not to benefit the beneficiaries, but as a simple mechanism to prevent funds leaving the company, possibly damaging it. That flies in the face of all the evidence and the rules on which such matters were established. Not one case of a collective submission for aid from the company's workers to the trustees has been passed, stretching back many years.
In many trusts, only about 10 or 20 people, and certainly fewer than 100, are involved. But in this case, more than 3,000 workers were involved, and we are talking not about a few pounds or a few thousand pounds but—

Mr. Deputy Speaker (Mr. Michael Lord): Order. I hesitate to interrupt the hon. Gentleman because I am conscious that his remarks relate to the Bill, but this is a Third Reading debate and he must talk specifically about the Bill's contents, not what is not in it or what it cannot do.

Mr. Meale: The Bill does not fully cover the need to protect the beneficiaries of such trusts. As I said, the trusts involve many hundreds of millions of pounds, yet 3,200 beneficiaries can obtain no help. Despite repeated requests for a representative on the board of trustees, that has been denied them.
Can the Minister give some assurance that some of those 3,200 beneficiaries will be allowed to represent their interests on the board of trustees? The trust was managed in such a way that huge amounts were transferred from the provident to the charitable fund. Interests were clouded, and Mr. Bailey Thomas's personal fund, which had to be transferred on his death, was transferred to the charitable fund not to the provident fund, as it should have been under its remit. Two or three people are now sitting on hundreds of millions of pounds, at least a third of which should be in the rightful ownership of and managed by the beneficiaries of the provident trust, but it is not.
Will the Minister give some assurance that such situations will not occur in the future? Will he further use his good offices and the Bill to influence the public trustees to examine whether a representative of the beneficiaries could be appointed to protect their interests? Will he use his influence to cause the Public Trust Office, of which he has charge, to change the current public trustee? I can say categorically that, of the 3,200 beneficiaries who have a claim to the beneficiaries' cash, not one has any faith whatever in the person holding that position.

Mr. Simon Hughes: I apologise for not being here at the beginning of the debate, which I knew would come quickly and pass relatively quickly. I propose to make a

couple of comments, but I am conscious that, like the hon. Member for Surrey Heath (Mr. Hawkins), for today's purposes I am from the substitutes bench. Like the hon. Member for Eddisbury (Mr. O'Brien), my hon. Friend the Member for Torridge and West Devon (Mr. Burnett) cannot be here, and I give his apologies to the House. He is opening a school in Devon today, which he regarded as something that only he could do, whereas I could easily fill in for him here.
I also wish to place on record, as my hon. Friend did at an earlier stage, our thanks to our colleagues in the other place, particularly our noble Friend Lord Goodhart, who is an eminent trust lawyer. I did my trust law course at university, and it produced the only memorable quote from any lecture during the whole of my three-year law degree, and that was from Gareth Jones, himself an eminent trust lawyer. The week before our final exams, which were to take place on Ascension day, he said, "Some of you will understand this and some of you will not understand it, and next week some of you will go up and some of you will not go up." Some of us just managed to get up high enough to be able to move on, at least to another degree.
Trusts, as the Minister said, are perceived by the outside world as being dull, dry, technical, legal and complex, but they are everywhere. I, probably like every other hon. Member, am a trustee of a few small, relatively unimportant trusts. We are all asked to perform that role, either in a family or community context. But trusts are often responsible for huge assets and important issues.
I thank the Minister, his colleagues, and the Conservative spokesmen for their collaboration and co-operation. The Bill was brought forward as a result of the Law Commission's view that the law needed to be reformed, and it received widespread support throughout both the profession and the professions, and on both sides of the House. Whatever its demerits—Liberal Democrats have not argued that it is a perfect Bill—it improves the law considerably, particularly in the way in which it widens investment powers, which was its main purpose.
I want to ask the Minister the one question that has remained as a recurrent theme in the speeches, contributions and questions of my hon. Friend the Member for Torridge and West Devon, and that concerns people in professional capacities, not usually lawyers, although they could be, charging trusts, which have no recourse, at such a level that their funds are seriously depleted. We are all conscious that it is easy for professionals—if I may be so bold to say so, it is often banks and such organisations—to charge considerable amounts of money, because they administer funds and are effectively in control of day-to-day management, unlike in the auditing of accounts for a small local community or organisation, which is done for £400 a year.
People have often sought a way to challenge professional fees. That is not dealt with here, but it is a recurrent concern. When the Minister replies will he say how the Government envisage remedying that problem? What recourse is there? Do they contemplate either further legislation in the context of trust law, or further legislation in the context of Department of Trade and Industry legislation, which will deal with the regulation of professional bodies and their accountability?
There are one or two other matters of lesser importance that my hon. Friend raised to which at some stage the House will return, but, consistent with the approaches of


other hon. Members, it is sufficient at this stage to say that the Bill considerably improves the law and is a good piece of legislation. Society will be better off as a result and we wish it well.

Mr. Alan Hurst: Like others, I propose to speak briefly. First, I declare an interest as a practising solicitor and doubtless a trustee of several small trusts.
I am spurred to speak by my hon. Friend the Member for Mansfield (Mr. Meale). I am not in a position to speak about the facts relevant to the trusts to which he referred. However, I fully comprehend the difficulties that beneficiaries encounter, especially in cases of clear, blatant and dishonest breach of trust. Such a breach may be a matter for the criminal law, but that does not necessarily help the beneficiary if the money has been made away with and there is nothing left.
The Bill is to be applauded for introducing a concept of duty of care. I am not sure how much further it goes beyond the obligation on trustees to act in good faith. The hon. Member for Southwark, North and Bermondsey (Mr. Hughes) hinted at the difficulty of enforcement when a problem arises. It becomes even greater if the trust is relatively small. In some ways, it is easier when a large sum of money is disputed. The cost of seeking a legal remedy for breach of trust in the case of small sums may outweigh any possible gain.
If I remember it correctly, the case of Jarndyce v. Jarndyce in "Bleak House" was pursued for decades and ended only when all the trust money was spent on the fees of the competing lawyers. I do not necessarily claim that that is the worst that can happen, but it is not helpful to trustees for moneys to be squandered in that way. I therefore hope that, in due course, my hon. Friend the Minister might be able to consider remedies that would make it easier for beneficiaries to follow up what they perceive as defects in the administration of the trust.
I should like to consider the way in which to undertake a proper assessment either of the trustees or those whom they employ, as the Bill envisages. In some ways, it is easier if those involved are solicitors. I shall have to consider the matter in more detail, but it may be possible to obtain a remuneration certificate for charges from the Law Society. That facility does not exist when the relevant trustee or agent is not a solicitor, but perhaps a banker. People, who are possibly elderly and in circumstances that worry them, often enter into a trust arrangement with their bank on standard term document clauses. Those clauses carry horrific charges, to which they have already agreed, for remuneration. I referred to that briefly in Committee.
When a small trust has been entered into, perhaps many years previously under the terms of a will, and the testator dies and the estate is very small, banks are not unknown to renounce probate. They thus abdicate their responsibility for what they took on as a profitable exercise 20 years previously because it is no longer profitable for them. That might be regarded as a breach of trust. It certainly does not constitute acting in good faith, and there is currently little remedy for the beneficiary who suffers the consequences.

Mr. Lock: With the leave of the House, I shall respond to the debate. I am grateful for the welcome that hon. Members of all parties have given the debate. I shall attempt to respond as briefly and succinctly as possible to the various points that hon. Members have made.
First, let me deal with the points of the hon. Member for Surrey Heath (Mr. Hawkins), and the matters that I set out in detail in a letter to the hon. Member for Eddisbury (Mr. O'Brien). The Bill contains two separate secondary legislation powers. First, clause 30 includes the power to make regulations for remunerating charitable trustees. That is highly appropriate because the definitions of the circumstances in which some charitable trustees should be remunerated, and adaptations to them, are ideally suited to secondary legislation.
The main anxiety of the hon. Member for Surrey Heath was about clause 41 and the suggestion of a Henry VIII power to make regulations to overrule trustee investment criteria in local or private Acts. I am afraid that the hon. Gentleman simply made a bad point. Schedule 2 amends the Cereals Marketing Act 1965, the Betting, Gaming and Lotteries Act 1963, the National Heritage Act 1980, the Universities and College Estates Act 1925 and several other measures. They are all the relevant measures that we have been able to find, but a full Lexis search will not reveal every single trust. To hamper the beneficiaries of a trust under a private Act that has not yet been identified with having to wait for primary legislation before doing the good for them that the Bill does for all other trusts is an outrageous proposition, which does not bear consideration.
I must place on record the way in which my hon. Friend the Member for Mansfield (Mr. Meale) has diligently pursued the interests of his constituents in relation to the Mansfield brewery trusts. He has done that relentlessly and is fully aware of the need for the trustees to be accountable to the beneficiaries. The standard investment criteria in clause 4(3) may assist him. Paragraph (b) provides for trustees to bear in mind
the need for diversification of investments of the trust, in so far as is appropriate to the circumstances of the trust.
I understand that that is one of the bases on which the public trustee believed that it was necessary to diversify the ownership of assets in the case that we are considering. It is a matter for the public trustee's discretion.
Jurisdiction over the public trustee is not within my ministerial capacity, but I will draw the remarks of my hon. Friend the Member for Mansfield to the attention of my hon. Friend the Parliamentary Secretary, Lord Chancellor's Department, the Member for Liverpool, Wavertree (Jane Kennedy). She is primarily responsible for that aspect of policy, and I am sure that she will write to my hon. Friend in response to his remarks.
The hon. Member for Southwark, North and Bermondsey (Mr. Hughes) and my hon. Friend the Member for Braintree (Mr. Hurst) talked about trustees overcharging. That is a serious point, which was made in a responsible fashion in Committee, and I am grateful for the opportunity to return to it. Clause 29 provides that trustees of a trust corporation, not a charitable trust, are entitled to receive reasonable remuneration from the trust. My hon. Friend the Member for Braintree and the hon. Member for Southwark, North and Bermondsey


described circumstances in which trustees do not act in the best interests of the trust or of the beneficiaries, but primarily serve the interests of the trustees, as a commercial body. That is not appropriate behaviour by trustees.
It is now clear that trustees are entitled to charge only reasonable remuneration—the definition of reasonable is not the same for a multi-million pound trust and for a small trust in a will. One would expect proportionality between charges and the assets in an estate. That is incorporated in the Bill. I bear in mind the comments about renouncing trusteeship, but the Bill is a warning to professional trustees that, if they take on a trust, they must ensure that their charges are no more than reasonable. The Bill provides that clarity, and I hope that that is welcome.

Mr. Simon Hughes: Will the Minister clarify for the record that the Bill applies not only prospectively to new trusts that will be established after it is enacted, and to people who become trustees, but to the actions of existing trusts from the day of enactment?

Mr. Lock: Yes, I am certainly prepared to give that assurance. The Bill contains a set of default powers, which can be overridden by specific provisions in the trust instrument. However, existing trusts will be governed by the Bill because, once it receives Royal Assent, it will apply as much to them as to those that will be created. I hope that that is the assurance that the hon. Gentleman seeks.

Question put and agreed to

Bill accordingly read the Third time, and passed, without amendment

Orders of the Day — BNFL(Public-Private Partnership)

[Relevant documents: Ninth Report from the Trade and Industry Committee, Session 1999–2000, HC 307, and the Government's response thereto, HC 848.]

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pope.]

Mr. Martin O'Neill: I am pleased to have this opportunity to debate the report. When my colleagues on the Committee and I started work on this subject in June 1999, we assumed that we would undertake a fairly routine but, given the difficulties that people occasionally have following the arrangements of British Nuclear Fuels, somewhat complex operation. Little did we realise that we would be involved with far more controversial subjects, including safety procedures, the organisation and delivery of data, what might be regarded in some circles as the scandal affecting the organisation—that resulted in the departure of several senior staff and the sacking of a number of people further down the line of command—and the questioning of the organisation's whole character.
When we started, our remit was—and, indeed, it remains—to consider the suitability or otherwise of the proposed public-private partnership as a way forward for BNFL. That required us to examine the activities and liabilities of the company, which has four main areas of activity: nuclear reprocessing, the fabrication of mixed oxide fuel, the generation of electricity in Magnox stations, and substantial business involvement in the United States, involving waste management, nuclear facilities and nuclear fuel services. Moreover, we had to set alongside those revenue-generating aspects of the business a consideration of the scale, character and reporting of its liabilities.
To say that we found issues that concerned us in those areas would be an understatement. BNFL is a big company—it employs some 23,000 people who operate in some 15 countries—and in its ranks can be found some of the best qualified nuclear scientists and engineers in the world.
The report contains an interesting section describing BNFL's background and organisation—a short but interesting history of the British nuclear industry. That may be the first time that such a history has been written in a coherent and easily intelligible form. That section is not recommended bedside reading, although anyone who suffers from insomnia would not necessarily find it to be the best cure—it is quite a good read. However, I intend to discuss not so much the report's contents as some of the areas on which the Government's helpful response did not touch.
Some of BNFL's exceptionally qualified people have been involved in the nuclear industry since the outset. Its traditions come from the military and civil nuclear industries and its origins can be traced back to the 1940s. Understandably, great pride is taken in its achievements, but there is still a culture of secrecy, which is often unnecessary in a modern energy-oriented business. Such is the scientific complexity of its operations that there has been a tendency among some staff to patronise mere mortals, such as my colleagues and myself, and query the need for our work. That led to a stridency among some of those who are critical of its operations, which in turn created a tendency towards megaphone diplomacy on both sides of the debate.
We found among all levels of staff at BNFL a willingness and an anxiety to be helpful. They sought to provide us with the information that we wanted. However, the manner in which the accounts were drawn up suggested a degree of opacity that could be explained only by the cynical suggestion that there was something to hide. My colleagues and I had considerable sympathy for Dr. MacKerron, of Sussex university, who sought to get behind the facts and figures, but has been thwarted in all too many ways. I hope that BNFL's new chairman, Hugh Collum, who is a distinguished figure in the world of accountancy and finance, will be able to secure far greater transparency in the recording of the company's affairs.

Dr. Stephen Ladyman: First, I apologise to my hon. Friend for having missed the first two minutes of his speech, and to you, Mr. Deputy Speaker. I assure you that when I saw my hon. Friend's name appear on the monitor, I broke the world record for running from Norman Shaw North to the Chamber.
My hon. Friend touches on the key point that if we want BNFL to develop, and nuclear technology to become acceptable again, absolute openness in all that the industry does is essential. I refer not only to commercial considerations, but to scientific and safety aspects.

Mr. O'Neill: I completely agree with my hon. Friend, whose apologies I accept. We all suffer such problems, but some hon. Members have heart conditions that are better suited to running like that.
Frankly, there is now a recognition that last year's events, and the public's reaction, mean that a new approach is required. I hope that as well as Hugh Collum, the new managing director, Norman Askew, who was appointed in the wake of the data falsification scandals, will be successful. I stress that what occurred was not a technical failure in the company, but the falsification of data. The major concern was the threat not to safety, but to the company's business integrity and good name.
The company deals with sensitive contracts throughout the world. It was therefore essential to bring in new management—people with a sense of responsibility—and to break with what might be called the mere civil service tradition in BNFL's business culture. That is why several new senior management figures, including the two whom I mentioned and others, are trying to inculcate in the company a radically different culture. I hope that it will embrace openness and a willingness to share technologies.
Although the industry is nuclear, its engineering is not that complex. None the less, the materials that it uses require care and a safety culture, although those have not always been as strong as they should have been. We should face the fact that the nuclear industry is not alone in being affected by such considerations. The north-west of England contains chemical plants of a complexity that requires the highest safety standards. I do not suggest that such an approach is necessary only in the nuclear industry—it has been achieved across British industry and in the most advanced areas of technology.

Mr. Eric Martlew: On the question of safety, the inquiry was into the proposed public-private partnership for BNFL. My constituency is close to

Sellafield and Chapelcross, and we regard safety as paramount. Does my hon. Friend believe that there would be any compromise on safety if we took in a private partner? Obviously, if a private partner comes in, money will go to the Exchequer. There has been disquiet in Cumbria for many years about the fact that even though Sellafield is in the area, money has not come from the Government to improve the infrastructure.
We all realise that there will be a decline in the number of jobs in the nuclear industry, especially on the west coast. Does my hon. Friend believe that money should be given to improve the infrastructure? The road from my constituency to that of my right hon. Friend the Member for Copeland (Dr. Cunningham) is a disgrace, and this is a perfect opportunity to put money in and give us a better infrastructure so that we can encourage other industries to come to the west of the county when the number of jobs at BNFL declines.

Mr. O'Neill: On my hon. Friend's last point, it is easier to get from Edinburgh to Carlisle than to get from Carlisle to Cockermouth. The area is not well served by its infrastructure, but I leave the lobbying for roads to others, as we all have our own agendas on where road funding should go.
My hon. Friend asked about compromising safety. We had lengthy discussions with Mr. Lawrence Williams and his colleagues in the Health and Safety Executive, who were very sensitive to the issues that we raised. We know them and have had dealings with them in relation to other parts of the British nuclear industry. We got the feeling that their concerns about safety will not be compromised by any change in the nature of ownership. The standards that the HSE is now imposing on the nuclear industry will not be changed in any way as a consequence of a change in ownership.
In recent years, the British nuclear industry has had traumatic experiences at Dounreay, Sellafield and other parts of its operation, where there has been overdependence on outsourcing. The problem was that in many cases, the existing management did not know what was going on because the work was being done not by them but by a range of contractors, who sometimes were not as safety-conscious as they should have been, and were not part of the big picture. As a consequence, the nuclear industry is now somewhat chastened.
There are also suggestions that in some parts of the British nuclear industry—not at Sellafield—there was a hint of regulatory capture. Perhaps people had got too close to the organisations and the individuals whom they were supposed to be regulating.

Dr. Rudi Vis: Is it not the case that if subcontractors are not as safety-conscious as they should be, it is BNFL's responsibility to make sure that they are?

Mr. O'Neill: I do not dispute that. However, the previous Government set themselves on a particular road, and if they could not privatise parts of the nuclear industry, they wanted to outsource as much of the maintenance and engineering activities as they could. As a consequence of diktats from Ministers, there was a tendency throughout the nuclear industry to be overdependent on people who did not necessarily always have the safety awareness that they ought to have had, as is well recorded.
We took the question of safety very seriously, and, as I said, we held long sessions and had briefings and visits. When we went to Sellafield, we were briefed by the Health and Safety Executive before we went and saw what was happening. None the less, when we put things together, we came to the conclusion that there was a case for a public-private partnership. There was certainly a case for injecting money into the industry, over and above what was coming in from the public purse for what was, in the past, a fairly profitable business for us as British citizens.
On the other hand, in the increasingly privately owned world nuclear industry, it is essential that proper commercial disciplines are introduced in organisations that still have a legitimate, but irrelevant, civil service tradition of administration. We have to get across to the work force and certain parts of the management of BNFL the message that what was good enough in the past will not be good enough in a globalised market, where there is always a downward pressure on costs and a need for a degree of flexibility in management—which have not always been the hallmarks of BNFL's operation.
People will tell us that BNFL has been extremely effective in cutting costs and has made itself more efficient. I do not deny that, but I get the impression that BNFL and other parts of the British nuclear industry have lived for too long in a kind of cosy relationship and, as we say in Scotland, have been taking in each other's washing. They would do wee numbers for people, and jobs would be done. The point is not about safety; it is largely about sound business practice, which was not always present. Business was conducted by nods and winks, and, as the books were terribly difficult to understand and follow, it was sometimes difficult to track expenditure trails through the morass of the companies' accounts system, as Gordon MacKerron of Sussex University found.
There was a veil of secrecy over the organisation, so there were understandable concerns about security and similar matters. Extremely hazardous materials are being used, so there must be a secure means of dealing with them. Indeed, it was a civil libertarian, my right hon. Friend the Member for Chesterfield (Mr. Senn), who, as Secretary of State for Energy, armed the police who guard BNFL establishments. My right hon. Friend introduced that measure because he recognised that the threat of terrorism was such that security had to be in place.
The Select Committee came out broadly in favour of the PPP, for the reasons that I gave. We were a wee bit bemused by the question of whether the Government had considered the possibility of total privatisation. I realise that the company is involved with military, security and safety matters, and there may well be a case for a PPP, but the terms of the remit given to the accountancy company KPMG, which was called in as a consultant to conduct the exercise, were very narrow. Will my right hon. Friend the Minister for Energy and Competitiveness in Europe explain why the option of full privatisation was not offered? Was that on grounds of principle or practicality? We accept that, as a result of the events last year, the date for the creation of the PPP has slipped. However, will my right hon. Friend give us an indication of when the company will be ready for a widening of ownership?

Mr. Dale Campbell-Savours: When I read the part of the report that dealt with those matters,

I could not quite work out the motive behind the question. Why would we necessarily want to know whether that issue was included, when there would be open hostility in west Cumbria to 100 per cent. privatisation? An acceptable compromise has been made, so why was that question posed? Did people simply want to put it on the record that the option of privatisation should not be pursued?

Mr. O'Neill: As my hon. Friend knows from his long years sitting on Select Committees and on the Public Accounts Committee, we always try to establish as much of a consensus as we can. Conservative Members on the Committee may want to know the arguments for full-blooded privatisation and Labour Members may want to know the arguments for a PPP. We felt that, as an exercise in open government, there would be no harm in asking the question, and I hope that my right hon. Friend the Minister will provide clarification.
Mr. Askew told us that the targets would not be met this year, which will be important when we get to the practicalities of the PPP. He anticipated that additional, new, more stringent targets would be introduced. When are those targets likely to be published, and what form will they take? Will they be published or will they be put in the Library? We would be obliged if the Minister could give us that information.
Once the company has passed those milestones, any potential investor would like, as a matter of due diligence, to be able to read and understand the accounts. I keep coming back to this issue, because it was a recurrent theme in the Committee. The reporting accountants were instructed to look into the clarity of the accounting procedures. Can the Minister tell us what bill of health they were given?
In the Government's reply to the report, they said that there were opportunities in Japan. Can the Minister tell us what the position is now, and when, if at all, the transportation of spent fuel from Germany will be resumed? What is the state of play on the apparent disagreements between BNFL and its major customer, British Energy? British Energy has sent a document to a number of Members suggesting that it would require an immediate cut in the charges that BNFL imposes for work carried out. It is beginning to rattle the cage on the issue of storage rather than reprocessing after 2006. It is only right that we have a clearer understanding of the difficulty that has arisen between BNFL and its largest customer, British Energy.

Mr. David Chaytor: Does my hon. Friend agree that the issue of storage versus reprocessing has not suddenly burst on to the scene recently? It has been given emphasis because of the position of British Energy. For many years, a solid body of evidence has suggested that storage is a safer long-term prospect, and cheaper than reprocessing. Does he not think that BNFL should have grasped that nettle long before now?

Mr. O'Neill: My hon. Friend says that there is a body of evidence. There is certainly a body of opinion, but I am not sure whether the two are necessarily the same. I shall give an example. Prior to the privatisation of British Energy, the old Scottish Nuclear Ltd. was in protracted negotiations with BNFL on the processing of the Torness material. There was a debate at that time


about whether it should be stored at Torness, and it became clear that that was as much a negotiating tool used by Scottish Nuclear Ltd. as an environmental argument. None the less, we must recognise that storage on site is desirable if we want to avoid worries about transportation.
There is also the question whether appropriate space and facilities are available on site at reasonable cost to provide the storage required. Storing is not a simple process. It is perhaps more attractive than having trains containing waste or spent fuel trundling across the country, and the worries that that would cause some people. Whether those anxieties would be justified is a different matter.
We did not want to get into that issue in any great detail. However, we recognised that it was important, and that, as a revenue stream for a company that may be partially privatised, it would be of more than passing interest to anyone involved. We want to find out the Government's thinking.

Mr. Christopher Chope: Does the hon. Gentleman agree with me that the Government's response to this particular aspect of our report is complacent in the extreme? They take a hands-off,"nowt to do with us" approach, and consider that this is a commercial matter for the two companies. Surely they should go to the root of the viability of any public-private partnership. We know from the Committee's other work that it is increasingly the practice in industry to work alongside suppliers. BNFL accounts for some 25 per cent. of British Energy's costs, and for them not to talk to each other and reach a common agreement on the issue is ridiculous.

Mr. O'Neill: I would not go quite as far on this issue as my colleague on the Select Committee. I think that there is an appropriate relationship between state-owned corporations that are moving towards partial privatisation. There is an arm's-length relationship, and the decisions and the responsibility rest with the company.
However, there is a problem. In some areas of reprocessing, such as MOX facilities, Ministries other than the Department of Trade and Industry are apparently reluctant to come to a decision about the licensing of the plant. We must question the working of government there. I would be happy for BNFL to have the maximum independence that it can have under the DTI within its present system of ownership. The hon. Gentleman and I agree that a public-private partnership would not be a bad thing. In order to prepare for it, BNFL's management must show that it is capable of running the company in the big, dangerous world with the maturity and independence that it has not always had hitherto.
I want to put down a marker. It is not the demonstration facility for MOX that worries me, because I realise that that is not a major issue any more. However, we need to know what will happen to the main facility that has been constructed and is awaiting licensing. If it does not appear in the corporate plan, there will be a gaping hole in the finances.
I have complained about the fact that we do not know where half the money is or where it goes—but we are now beginning to find out. It would be even more worrying if, when the plan is produced and we start to look for

potential partners for BNFL, such issues were not properly dealt with. They must not be handled with indecent haste, but there should be a decision. Governments should not hide behind indecision on such matters. Either we take this step or we do not, and if we do not, we must accept that the company will be that much smaller and perhaps less attractive, although we do not know.
Since the report was published, we have had the rundown table for Magnox, which is helpful. However, we must ask questions about the prospects for fuel manufacture at Springfields and reprocessing at Sellafield, and what the consequences will be for those facilities given that Magnox probably has another 10 or 12 years before it is completely finished as a source of generation. We want to know what alternative uses will be sought for the Sellafield and Springfields sites.
We should also like to know more about the Magnox liabilities. The longer Magnox is in operation, the longer the period over which liabilities can be spread, whereas if the operation period of Magnox stations were contracted, the liabilities would be spread over a shorter period. It is only fair to put that information in the public domain so that the impact of the change in the timetable on those liabilities is on the record.
We should know a little more about the United States business and what has happened about Hanford. Contracts were renegotiated, and it was understandable that the problems of emerging work—as it used to be called in the refitting of British naval ships—were a lot bigger than anticipated, and the price had to be changed. A number of issues are involved, but the Hanford issue must be dealt with.
I should like to deal with another, slightly different aspect of Magnox. What income stream replacement will there be when Magnox is removed from the company's activities? Although those reactors may be the dirty old warhorses of nuclear generation, they provide about 8 per cent. of our energy requirements. They are also linked to the national grid. Therefore, as the wires are there—to put it very simply—do Ministers have any proposals for alternative generation systems that could, if necessary, be connected to the system?
Conversely, have the Government, in partnership with BNFL, considered whether there is a case for further nuclear generation? I am a bit ambivalent about that. Although I realise that, in terms of emissions, it is a very clean energy, I also know that it has problems with back-end costs and with liabilities. Nevertheless, if we want to create and sustain a proper generating mix in the United Kingdom, we have to recognise that, although windmills and wave generation may have considerable attractions, the attractions of alternative forms of generation have probably been exaggerated. I therefore think that we ignore the nuclear element at our peril.
It is rather depressing that the Prime Minister, in an estimable speech to the Green Alliance, completely ignored the nuclear option. It is as if the Government have decided collectively to run away from the issue. I think that it is an abdication of intellectual responsibility to fail to consider one of the great British scientific achievements of the 20th century and to seek to discard it, as some people seem to be doing.
I am not certain that, at this time, nuclear generation is the most economic means of generating electricity. I also recognise that it has environmental costs that are different


in character from those associated with gas-fired or coal-fired stations. However—as I have always said, as one who has always acknowledged a constituency dependence on the coal industry—if we are to continue arguing for electricity generated from coal, we shall have to continue using the nuclear industry, for some time to come, to create some space in the envelope. We have not yet found ways of bridging the potential generating gap that will begin to emerge from about the middle of this decade.

Mr. David Drew: Does my hon. Friend accept that part of BNFL's importance lies in its links with Westinghouse and fourth-generation reactors? Does he also agree that if we do not proceed with that technology, the French or perhaps the Americans will lead the way? There is no doubt that we will need new nuclear capacity.

Mr. O'Neill: The worst argument for any form of energy technology is that if we do not build it, someone else will. The history of the British electricity generating industry is littered with mistakes that are the consequence of such arguments. Across the country, we have power stations that were built because boiler suppliers were running out of orders. People have said, "If we try just a wee bit harder, we will have generators"—advanced gas-cooled reactors, pressurised water reactors, and Magnox, although not the latest ones—"with one type or another of the Union flag wrapped around them." We tend to go for such generators not because they provide safe and cheap energy, but because they create a lot of jobs at the same time. I think that we should have a single-mindedness about the way in which we consider power generation.
As I said, in such a complex business there are other problems, such as the continuing anxiety about safety. Whatever happens, people will worry. The Dounreay situation is one of the interesting aspects of nuclear generation that the Committee investigated. Although it is one of the smaller-scale operations, in some ways Dounreay is just as dirty and difficult as others. In Scotland, and especially in the north of Scotland, there was anxiety about the condition of the site, safety procedures, its evident past sloppiness, and the fact that we now have to reap that whirlwind. However, under the United Kingdom Atomic Energy Authority, and particularly with the leadership of John McKeown and his colleagues, there has been a transformation not only of the site but of the public's attitude towards it. Those anxieties have been largely diminished.
There is a very vigilant group of individual critics of many of Dounreay's previous activities, but in evidence taken by the Committee, we saw a noticeable shift in their attitude. They were not embracing the facility, but they were certainly much less worried about it than they had been.
I look forward to a public-private partnership involving BNFL, although I do not know as yet what activities it will engage in. My colleagues and I have as many unanswered questions as answered ones, as the situation was not clear when we were investigating. However, it is fortunate that we are having the debate today, when the Government and BNFL can look at the situation with a rather more detached and cooler eye than was available earlier this year to the new management.
My colleagues and I look forward to a public-private partnership. We think that BNFL can operate at a world-class level in various sectors of the nuclear industry, and that it has a tremendous contribution to make to British technology and science and to the economic well-being particularly of the north-west of England, and especially of Cumbria, where so many good jobs have depended on BNFL for so long.

Mr. Michael Jack: I congratulate the hon. Member for Ochil (Mr. O'Neill) and the Select Committee on Trade and Industry on their report. His speech and the Committee's conclusions touch on some of the most important issues surrounding the proposed BNFL public-private partnership.
I have a strong constituency interest in the matter, as the Springfields works are just outside Preston. When strangers come to my constituency and see the lovely, low and, in many cases, modern facilities, and ask, "What goes on in there?", to shock them I say, "That is the home of the United Kingdom's nuclear fuel manufacturing capability." It always surprises them. Great investment has gone into Springfields.
I have also had the pleasure of meeting Springfields' work force and management, who are dedicated to quality, cost reduction and competitiveness. Although all those are buzz words, they are also real words that entail efficiency in modern business. They also demonstrate that, mentally, in their approach Springfields' work force and management are very much in the private sector. Although they very much welcome the proposals for a public-private partnership, as the Committee Chairman indicated, some may even be thinking more about full-scale privatisation. However, if the Government wish to pursue the PPP model, it is our job to discuss the industry's needs within that context.
So often when we discuss British Nuclear Fuels, the difficulties of the right hon. Member for Copeland (Dr. Cunningham) and his constituents tend to dominate the debate, whereas the business's front and clean end—the manufacture of nuclear fuel—tends not to receive so much attention. However, BNFL's takeover of Westinghouse Electric Company's business has had great implications. It has absorbed into its midst not only a private enterprise, but the heart of world nuclear fuel manufacturing. It also demonstrates the difference in approach between BNFL's fuel and reactor services division and its other divisions.
As BNFL's latest report indicated, those services are seriously big business: £730 million of BNFL's turnover is accounted for by the fuel and reactor services division. Although there have been natural growing pains as the company has taken on Westinghouse's responsibilities, that is driving the thinking about the fuel division and its future. I shall develop one or two of those points in a moment.
I was grateful to the Select Committee Chairman for sharing his observations on the Prime Minister's speech on the environment. However, I do not want to get into the realm of party political point scoring, as the matters that we are debating are too serious and affect the livelihoods of thousands of people in my constituency whose jobs depend on the nuclear industry. Nevertheless, if we are to ensure that the British nuclear industry is


effective and that, in the not too distant future, it will be capable of seriously considering investment in new forms of nuclear generating capacity, we have to address some strategic issues. According to figures supplied to me by the company, in 1999–2000 our nuclear industry, BNFL and British Energy, will together have avoided the emission of about 79 million tonnes of carbon dioxide.
I do not want to strike an unnecessarily controversial note with the Minister at this early stage, but in response to a question I had tabled inviting her to give me some feedback on the impact that the closure of the Magnox stations would have on the Government's meeting of its Kyoto targets, she rather surprisingly said that there would be no impact. There may well be some statistical reason for that, but—in the light of a point that I shall make shortly—I think that it would be useful to have it put on record why there will be no impact, given t;he likelihood of the closure of a major part of our nuclear generating industry over the next decade. We should view the matter in a European context. The nuclear energy generating industry avoids an emission of 800 million tonnes of carbon dioxide, and the European Union's Kyoto target of an 8 per cent. reduction in the emission of greenhouse gases is equivalent to 400 million tonnes of carbon dioxide. That makes clear the importance of the nuclear industry.
When preparing for the debate, I visited BNFL's Springfields plant. I asked members of the work force to come and talk to me, and over 130 did, at two meetings. I told them that the debate represented a fairly rare opportunity for the House of Commons to discuss the nuclear industry, and that I wanted my questions, and the views that I would express, to be theirs rather than mine. A common theme in what they told me was their wish for the Minister to make a clear statement about how the Government see the strategic position of nuclear generation in this country.
We can all talk about the business advantages of a public-private partnership or of full-scale privatisation, but we must ask what is the purpose. Part of it will be to change the business culture of BNFL. In this year's annual report, Hugh Collum said:
We have set priorities for each business group to deliver their own short term targets; the continued prospect of a Public Private Partnership will provide a powerful incentive to improve performance.
The Chairman of the Select Committee mentioned a number of changes that would have to be made in the management, and the management culture, of the company, but my dealings with the fuels division have shown me that many of those changes are already part of its working approach. If we are to realise the potential of a market which, in terms of nuclear fuel in the world, is worth some £20 billion, the commercial modernisation of BNFL—in terms of the fuels division, the potential for more capital and investment, and the improvements in production techniques that will enable BNFL to build on what is already there—is vital. It is vital if quotations such as the one that I read from the report are to become reality, and if the company's performance is to be improved.
The main message from the work force at Springfields is, "We are as good as anyone in the world at making nuclear fuel, and we want to be given the opportunity to show what we can do." For example, at present they do

not make any of the pressurised water reactor fuel. It is a commodity in world terms, but they recognise that through quality comes safety, and that through a combination of quality, safety and excellence comes reduced cost—and an opportunity for them to compete again for parts of the nuclear fuel business to which they currently have no access. If that is to be turned to commercial advantage, the public-private partnership will be an extremely good way of ensuring that the commercial potential of the fuel division is properly realised.
The Chairman of the Committee used the word "openness", and I concur with him entirely. I think that the fuels division is, if anything, more open than the back-end business, by the very nature of the occupation; but I pay tribute to BNFL. Who would have thought a few years ago that tens of thousands, if not hundreds of thousands, of people would go every year to a location next to the most radioactive site in the United Kingdom to learn about the nuclear industry? BNFL has provided for just that with its visitor centre, and efforts are made at the Springfields plant to give the local community a greater understanding of the industry.
That is welcome—it is a way of demonstrating that nothing is happening in the industry of which people should be frightened. When the workers at Springfields are asked about their reaction to what happened at Sellafield, they make the powerful point that they live in local communities and are answerable to local people, and run a safe ship. They deeply regret what happened, but they have pride in their work. Springfields, in Lancashire, is one of the beacon locations for high quality, high-precision engineering.
At a time when our manufacturing industry is under pressure, the advent of a public-private partnership and the opportunity for more investment will prove a very good way to sustain an industry in which the United Kingdom has considerable expertise and demonstrates considerable excellence. The Committee Chairman rightly reminded us of that.
There is, however, a downside of openness. Sometimes BNFL says that it will not do something, for quality reasons. For example, the company—in true private-sector mode—told British Energy, its main customer for advanced gas-cooled reactor fuel—that it was not satisfied with a particular batch of fuel rods, and would withdraw it because it was worried about the weld. It was then vilified in the press because it had taken up an issue relating to safety and quality control.
Let me return to my meetings with members of the work force. They would like us to talk more positively about the company's good points, because most discussion has been about the difficult aspects. Here is a responsible company, which is prepared on occasion to say to its principal customer, "We are not sending you this product because we are not satisfied with it." That is good management. We should encourage it, and the attitudes in the work force that go with it.
I think that it would be helpful to the work force, in the context of the industry's future, for the Minister to address the strategic issues. Those workers asked me, "If we are to see the decline of the Magnox stations, what is the potential for investment in new techniques such as Magrox, a new reactor design such as the AP600, or the


introduction in the United Kingdom of the pebble bed reactor system in which British Nuclear Fuels in South Africa has already taken a minority investment stake?"
On my recent visit, I found it interesting to observe the positive attempts that are being made to find ways of developing new designs at an affordable price, commensurate with benefits to the environment. I think that it would be helpful, while the Government own BNFL, to know how they feel about the subject, because I was asked more questions about it than about anything else. We can talk about new business arrangements and other procedures until the cows come home, but the people at Springfields want to know what is their future—and their future lies in the ability to make high-quality nuclear fuel for a long time to come.
The workers are also concerned about the impact on their business of the new electricity trading arrangements. Perhaps the Minister will say a word about that. Does she feel that the system does not properly recognise—as does the climate change levy—the benefits that can be gained from the nuclear industry? There was a feeling among the work force that coal had benefited once again, in terms of the structure of the electricity trading market, to the detriment of clean fuel technology.
Without doubt, the fuels division is ready for the competition that may result from the public-private partnership and the further introduction of private-sector techniques. However, as the Select Committee noted, the fuels division operates in a commercial world and it is right to place it in a commercial environment. That is the best way for it to learn how to react to competition from world companies such as Siemens, and others.
The future business strategy will also be influenced by the public-private partnership. For example, the fuels division will have the opportunity to enter manufacturing for eastern bloc companies with the so-called VVR system of fuel. Another matter to be resolved is the future of hexafluoride production. Such major commercial decisions must be taken in the context of a clear understanding of when the public-private partnership will come into being.
I welcome this debate on the nuclear industry, in the context of the public-private partnership proposal. I hope that the Minister, when she winds up the debate, will say more in response to the many important points raised by the hon. Member for Ochil and by the conclusions of the report from the Committee that he chairs.
My constituents who work at Springfields want to know about the future of their business. They are anxious to take on the burden of more competition. They know that they are good, and they are dedicated to quality. Above all, they are dedicated to safety, but they want this debate to give them a clear indication as to the future of their industry.

Dr. Jack Cunningham: I, too, congratulate my hon. Friend the Member for Ochil (Mr. O'Neill) and the Select Committee of which he is Chairman on a thorough, positive and concise report that is a vindication of the role of Select Committees in our proceedings. I have always strongly supported that role.
I also congratulate my hon. Friend on his speech, in which he touched on all the key issues that are germane to the debate. In addition, I welcome my right hon. Friend

the Minister for Energy and Competitiveness in Europe, and the Government's positive response to the report. Some questions remain unanswered, and I shall come to some of them in a moment.
The BNFL Sellafield site is in my constituency, and I have represented it in the House for 30 years. At present, it employs about 10,000 people directly. It is a huge, complex, advanced, high-technology industrial site, and I am delighted that my hon. Friend the Member for Workington (Mr. Campbell-Savours) is present, as many of his constituents work there.
The influence of BNFL on the economy of the north-west goes far beyond the boundaries of my constituency and of the whole of Cumbria. The north-west region of England benefits hugely from the engineering and other contracts in which BNFL is involved, and from the massive investment that goes into the company every year. The company makes a very considerable contribution to the economy as a whole, and not merely to west Cumbria or the north-west region of England. It is probably still the biggest earner of yen in the British economy.
My hon. Friend the Member for Carlisle (Mr. Martlew) pointed out that, although employment and investment at BNFL brings huge benefits for local people, there are some less positive factors. For example, there is not as much as 100 metres of the A595 from Carlisle to west Cumbria—the only trunk road to the Sellafield site—that is devoted to dual carriageway. That acts as a disincentive. The road is often horrendously congested, especially in my constituency. In addition, its lack of dual carriageway is presented as a reason why we cannot diversify the economy of west Cumbria more satisfactorily and successfully. That is something that we certainly need to do.
I have absolutely no difficulty with the proposals for a public-private partnership in which the Government would retain a 51 per cent. interest. In fact, I welcome it as a positive proposal. It has been seriously delayed by events surrounding the MOX demonstration facility, but getting the company into a position to take that option forward successfully should be a short to medium-term objective of the Government and BNFL.
I welcome, too, the fact that the company has a new chairman, chief executive and board. The Government's response to the Committee's report states:
In its role as shareholder, the Government needs to ensure that it is properly informed about, and can support, the company's overall strategy.
That has not always been true in the past of the Government's role in respect of BNFL. I am reassured by the deep commitment of my right hon. Friend the Minister to ensuring that the Government is properly informed about the company's strategy and can support it. As colleagues, she and I have had many meetings and discussions about the situation at Sellafield.
I have also had discussions with the nuclear installations inspectorate, which has published reports detailing the changes that it wants implemented at the Sellafield site, and other changes that it wants the BNFL management to implement. I have called before, and do so again, for the full and comprehensive implementation of all the recommendations from the nuclear installations inspectorate. Wide-ranging management restructuring has


already been undertaken, at board level and at the Sellafield site, and I am delighted to say that some of the unsatisfactory elements at the site are being corrected.
Earlier, my hon. Friend the Member for Ochil mentioned cost cutting, which is fine if it improves a company's efficiency and productivity. However, the previous board indulged not in cost cutting but in corner cutting, and that has been very deleterious to the successful operation of the company and the site. Many people pointed out those errors at the time: I am delighted that they are being corrected and that the company is recruiting workers in west Cumbria to replace many of the people in supervisory positions who were wrongly removed. That is very good news.
So far, the nuclear installations inspectorate has been very positive about the response of BNFL to reports that were pretty searching, if not coruscating. However, a great deal remains to be done, not least when it comes to the better management of Sellafield's legacy. That legacy originated in the military programme at the site, and was reinforced by other activities more recently. It is good to know that the nuclear installations inspectorate is satisfied with the progress made so far.
Emphatic support has been expressed for BNFL and its future by my right hon. Friend the Minister for Energy and Competitiveness in Europe, and by my right hon. Friend the Prime Minister, who said earlier this year that he believed that BNFL should be left to get on with the job. It is a world leader in many aspects of what it does. 1 agree with what the right hon. Member for Fylde (Mr. Jack) said in respect of Springfields, but it is also true of much of the work carried out at Sellafield. There is massive support for the industry among the communities that my hon. Friend the Member for Workington and I represent in west Cumbria.
In particular, we welcome the support that the Select Committee gives to BNFL's future, and we are pleased that it highlights the need for the company to continue fuel reprocessing at Sellafield. Indeed, we would go further—we hope that there will be an early decision to commission fully the Sellafield MOX fuel plant. That point was also raised in the Select Committee report. Such a decision would, in turn, open up new opportunities for business for BNFL. The global market for nuclear business is increasing. Many other countries, including many of our European neighbours, already have much larger nuclear contributions to their energy generation than we do. There will be business opportunities not only in Europe but further afield, in Japan and elsewhere.
I am in no doubt, and never have been—I have been a lifelong supporter of civil nuclear power—that the world will need an increasing contribution if we are to have any hope of turning the dangerous tide of global warming. The reality is that we will not meet those challenges without a contribution from civil nuclear power.
The company faces other problems as well, not just those flowing from the falsification of quality control data. Let me say again how pleased I am that the Select Committee has put that properly in context. This was never an issue of safety. It was an issue of falsification, which was quite wrong—indeed, it was devastatingly damaging to the company and to the jobs of those who, sadly, got involved. However, it was not an issue of safety

on the site. It went to the heart of the integrity of the company and its products and processes. That is what has been so damaging not only to trade opportunities but to the core finances of the company. We all know how poor its financial results have been.
I am quietly confident that the new management, together with the dedicated, skilled work force, will be able to turn the company around. They should certainly be given the support, encouragement and opportunity to do so, not just from the Select Committee but from the Government.
The targets set at Kyoto for climate change will be challenging enough in themselves with the present contribution of civil nuclear power to electricity generation. If we got rid of that contribution altogether, as some argue we should, the ability to meet those targets would disappear over the horizon. That seems evident, and it is not only my view but that of many others in this debate. I have never argued that we should generate all our electricity in nuclear power stations, and I shall not do so this evening, but as the evidence about the impact of global warming mounts, it is clear that civil nuclear power should have a role as one part of the solution—one option, one contribution—to a balanced energy policy.
The right hon. Member for Fylde pointed out that our modest contribution from civil nuclear power already obviates the production of about 79 to 80 million metric tonnes of carbon dioxide every year. In addition to that, it does not create oxides of nitrogen or sulphur, as does the burning of other fossil fuels. So using nuclear power offers quite a wide-ranging contribution to a better environment.
As I said, my views are not unique but are widely held. They are shared by other Governments and other countries and, in this country, by the Royal Society, the Royal Academy of Engineering and by many British trade unions. They are also shared by at least some European Commission officials who point out that if we are to make progress on global warming targets, about 85 new nuclear power stations will be needed within the European Union. James Lovelock, the creator of the Gaia theory on the environment, has spoken out in favour of a contribution from civil nuclear power to electricity generation. That is widely welcomed by myself and others.
I pay tribute to my constituents and those of my hon. Friend the Member for Workington who dedicate themselves to meeting the highest possible standards of safety and skill that can be achieved. The work force at Sellafield contains some of the leading world exponents of engineering, nuclear physics and environmental science. They are very proud of what they can achieve and of the opportunities that they present for improving the performance of the British economy as a whole. They deserve our thanks for that skill and dedication. They get a little tired of Members of Parliament calling for the closure of the plant willy nilly—not to mention a little angry, since that would mean that about 15,000 families in west Cumbria, and some more beyond, would be on the dole. Of course, it is a ridiculous assertion to make in the first place. Even if some aspects of the activity at Sellafield were to close, for whatever reason, other aspects would have to continue long into the future.
There were exchanges earlier about the storage of irradiated spent nuclear fuel. My hon. Friend the Member for Bury, North (Mr. Chaytor) asserted that that should


have been considered. He seemed to be implying that it had not been considered. Well, it has been. It is not that BNFL has not considered dry storage—it has considered the issue and dismissed it, and rightly so. BNFL thinks that reprocessing is the best practical environmental option when it comes to dealing with spent nuclear fuel, and 1 agree. It is rather curious to argue that nuclear sites present a threat to people and the environment and then in the next breath to say that we should nevertheless have more and more nuclear sites around the country as more and more dry stores are built. The people who advocate that never answer the question of what follows dry storage. What happens then? We all know that we cannot dry-store Magnox fuel in any event. Yet nobody ever answers those questions.

Mr. Chaytor: Will my right hon. Friend give way?

Dr. Cunningham: Certainly, in a moment.
No one ever says what happens if we store fuel and 10, 15, 20, 40 or 50 years down the track, there are problems with it. That would lead to proliferation, at every nuclear power station in every part of the country, of potential problems that would almost certainly need to be resolved by moving the fuel, which would then be in a far less safe state than when it comes out of the reactors and can be safely transported to Sellafield, as it has been for decades without any significant accident of any kind involving people or the environment.

Mr. Chaytor: I am grateful to my right hon. Friend for giving way on this point. May I ask him to consider two issues? First, BNFL has always said that it was not possible to store Magnox fuel and that it had to be reprocessed. If that is the case, why is Magnox stored at Wylfa and not reprocessed? Secondly, I take the point that dry storage has a life cycle and that at some point we have to find a permanent solution. However, if we use the same argument, we have to find a permanent solution to the storage of plutonium. The difficulty at the moment is that, through reprocessing, we are creating mountains and mountains of plutonium—the most dangerous substance known to man—and we have no idea what to do with it. In defending reprocessing, my right hon. Friend must say something about plutonium.

Dr. Cunningham: There are two things wrong with what my hon. Friend says—at least two things. I am pleased that he concedes that dry storage is not in itself a permanent solution. However, his assertion that we are creating mountains and mountains of plutonium is simply an exaggeration. The plutonium that is created is all stored in my constituency, quite safely and securely, and presents no problem. It is not a threat to anyone. I can arrange for my hon. Friend to visit Sellafield and see for himself, if he has not already been. He talks about the problem of long-lived nuclear waste accruing from reprocessing. There is nothing like a visual aid when one is discussing these matters. I have one on my desk, and perhaps I should have brought it with me. If all the electricity that I consume in my life were generated from nuclear power, the resultant highly active waste would occupy a cylindrical shape about 2 inches in diameter and 2 inches high. That is the reality.
Of course the waste is a problem and we need to contain and deal with it. We have debated that matter in the past, and my hon. Friend the Member for Workington and I have differed on the best way forward, so I do not want to get into that argument again tonight.
Although I respect the right of my hon. Friend the Member for Bury, North to question and debate the issues, he does not serve anyone's cause by exaggerating the nature of the problem or overstating it. Some people try to scare the public—I do not accuse him of doing this—into believing that we cannot manage these matters: that we are not competent and that we do not have the skills, the scientific know-how and the engineering ability to deal with them. The truth is that we do. We have had nuclear power in this country for a long time. We have a lot of operating experience, and in BNFL we have some of the leading people in their fields in the world. That is one reason why the Americans are increasingly turning to BNFL to draw on its expertise and experience to decommission some of their military bases, such as Rocky Flats and Savannah River. We can make a huge contribution by helping the former Soviet republics to tackle the awful legacy and backlog of nuclear problems that they have. We can make a huge difference to the global environment if we have the courage and common sense to back our nuclear industry and give it the support that it needs.
I hope that the Government will give the go-ahead without too much further delay, as my hon. Friend the Member for Ochil said, to the Sellafield MOX plant, so that we can deal in another way with a problem that my hon. Friend the Member for Bury, North raised: what we should do with plutonium. We can burn it, as mixed oxide fuel, in nuclear reactors. That is what we can do to decrease the stockpile that my hon. Friend rightly says exists. My hon. Friend says that there are mountains of it; I say that there are not mountains, but there is some.
The great thing about nuclear fuel is that 97 per cent. of everything that comes out of a nuclear reactor can be recovered and recycled. Surely that obviates the necessity for mining uranium, which is one of the dirtiest aspects of the operation.

Mr. Chaytor: Plutonium can be burned in MOX fuel, but we have to ask why British Energy does not want to burn it. It is because it is not economic. The second question is why BNFL has only 7 per cent. of the contracts that it needs to justify the operation of the MOX plant. That is because not enough utilities in Japan want to burn MOX fuel. Those are serious questions on which I hope my right hon. Friend will comment.

Dr. Cunningham: A number of people have mentioned British Energy. It is a privatised company and it is in financial difficulties. We all know that. I take no pleasure in saying it, but it is the reality. British Energy has simply said, "Let's abrogate our contracts with BNFL and put them into difficulties too." That is not the way business works. BNFL has lawful, signed contracts and has every right to insist that it be paid for the work that it has been contracted to carry out.
The right hon. Member for Fylde commented on the fact that there are no new-build nuclear power stations. I have always supported that idea and I would love to see it happen. The fact is, however, that after the privatisation


of the electricity generating industry, the privatised utilities do not want to build such power stations. I am not saying that they will never want to do so, but they do not want to do it now. In that regard, I am almost on the same ground as my hon. Friend the Member for Bury, North.
My hon. Friend is wrong to say that the Japanese utilities do not want to purchase MOX fuel and use it in their reactors. I think that he will be pleasantly surprised—or perhaps unpleasantly, given his standpoint on these issues. We can recover in the Japanese market. In my constituency in west Cumbria—at Sellafield—we have had a long, profitable and good association with Japanese industries. Japanese people are very welcome in the area. They come regularly to visit my constituency, mainly on business, but sometimes for pleasure, too, since it is one of the most beautiful parts of the world. I very much look forward to the prospect of BNFL at Sellafield doing more business with the Japanese utilities. That would be good news for my constituents and for the Cumberland and United Kingdom economies, and it would enable us to tackle the huge problems and threats that are presented to us by global warming.
I look forward to the Minister's replies not only to my questions but to those of my colleagues. I pay tribute to her for the way in which she has committed herself to work with BNFL to try to sort out the difficulties—they are considerable and I would not want to underestimate them. I give her my wholehearted support. I shall certainly work with her and other colleagues in the Government to ensure that we resolve those problems and that the company can go forward to further successes.

Mr. Andrew Stunell: I very much welcome the introduction by the hon. Member for Ochil (Mr. O'Neill) to the debate on the Select Committee report and the work that that Committee has done. This is a long-overdue exploration by the House of the state of the nuclear industry and of BNFL in particular.
I am a Member of Parliament from the north-west and I am extremely conscious of the high skill levels in the industry and the large number of jobs that are at stake. I am also conscious of the contribution that it makes to the welfare of that region and the country.
Unexpectedly, I found myself in a deal of agreement with the right hon. Member for Copeland (Dr. Cunningham), in particular with his remarks about the need to pursue vigorously the rectification of problems and to explore diversification. I may have been able to reassure the right hon. Gentleman, as we made the occasional eye contact, that it is certainly not my view that we could or should shut the door and walk away from BNFL or our civil nuclear power programme. Clearly, that programme should be allowed to continue as long as it is safe and economic, as it helps us to achieve our Kyoto targets and it benefits the nuclear industry as it stands. That may provide some reassurance for those working at BNFL's various sites.
In many respects, however, the nuclear industry has been its own worst enemy. It has been secretive and defensive for decade after decade. Often, it seems to have put safety second and cost third, and something rather hazy, called a "national objective" in first position, which seemed to override common sense on many occasions.
The industry has not been scrutinised by the House for many years. We have had a number of notable debates, which seem to come at approximately 10-year intervals. In those debates, my colleagues on the Liberal and Liberal Democrat Benches have marked out the cause of common sense and the need to challenge the unwritten and unstated assertions that have underpinned the industry. Those are all good reasons to welcome the debate; and to welcome both the Committee's report and the Government's response to it.
BNFL, as a significant part of this country's nuclear industry, has received major investment over several decades. It remains a major employer and maintains a major lead in nuclear and other important forms of technology; it is certainly a world leader in the manufacture, control and management of nuclear materials and fuel. The company has world-class expertise in decommissioning facilities and it is using that well.
Those are three major pluses, but there are also some major minuses. The company has experienced major environmental failures. The right hon. Member for Copeland may claim that a huge amount of waste would fit into a tumbler; that is fine, but a fundamental problem with all forms of nuclear material is that, intrinsically, they are highly traceable. An amount far smaller than could be contained in a tumbler could be detected on a beach in Norway 25 years after it was discharged into the sea at Sellafield, and traced back to its source with absolute certainty.
A fundamental of nuclear physics is the traceability of material because of radiation. However secretive people are and however long they resist acknowledging the problems when environmental failures occur, the nuclear signature—the fingerprints, the DNA sign—is always there. Those major environmental failures have dogged the nuclear industry throughout its life.
There are major economic failures too. At present, nuclear power is not an economic vehicle for investment for future civil power generation.
There have been major safety and security failures. Perhaps they are rarer in this country than they used to be; perhaps they are acknowledged more quickly. However, it is clear on some occasions that safety and security are compromised internationally.
The pluses and minuses of the nuclear industry have been well rehearsed and are strongly polarised. That often makes it difficult to hold a rational discussion—it is assumed that one must take an extreme point of view to take part. It is extremely encouraging that the Select Committee has produced such a measured, objective and careful report. The report explores the issues thoroughly and provides much helpful briefing; in the past, there has been much comment on the nuclear industry—some of it polemical and harsh. No doubt, hon. Members will bring that to bear on our debate.
We must realise, however, that BNFL—whatever else it has to do—must refocus its business. The company must repair its reputation, which has taken a severe knocking during the past 12 months—as all those who have spoken so far agree. The company must retire from reprocessing. The House must address those issues. The Government must inform us about them and, as a shareholder, they must take an active role in promoting them.
It is clear that the determination of the Government must be applied to the interests of BNFL in order for the company to refocus its business, repair its reputation and retire from reprocessing. Time and money will be needed.
The deferment of the implementation of the public-private partnership proposal was inevitable, given the problems experienced by the company. However, that deferment is also beneficial and desirable; even the new date referred to in the report will be too soon. If BNFL is to have a role in the future, it is important that the company understands the international context in which it operates. BNFL must refocus its business.
I depart strongly and sharply from the views of the right hon. Member for Copeland; it is not true that nuclear power is expanding worldwide. The number of nuclear reactors in commission in the world has been locked at about 500 for the past 15 years. New reactors are being built and commissioned, but the pattern is that they are in countries that either have authoritarian regimes or a perceived military or strategic need for nuclear power—or both.
Nuclear reactors are being decommissioned in every liberal democracy, and even in some countries that would not qualify as such; for example, Turkey and Taiwan have both recently decided not to proceed with nuclear power. There are complex reasons for growth in some areas and for the decision to restrict and decommission in others.

Dr. Ladyman: There is an alternative way to explain the differences in the commissioning and decommissioning of nuclear power stations. Are they not being commissioned in countries that do not have access to, or the money to buy, fossil fuels? They are being decommissioned in countries that have access to such fuels, where people are prepared to close their eyes to the fate of the world and to global warming.

Mr. Stunell: That is an interesting theory. However, it is always a mistake to ask a question to which one does not know the answer. The theory is not true. India offers an obvious example; nuclear power is being developed there, but it also has huge coal reserves. China is installing nuclear power; it too has large coal reserves and is actually expanding its generation of both fossil and nuclear fuels. Switzerland offers an example for my point about liberal democracies. That country has almost no coal reserves, but has decided to abandon its nuclear programme.
Various arguments can be brought to bear on the subject—I was just about to deploy one of them—but the shortage or the presence of fossil fuels is not a significant reason for nuclear development. A significant reason for a decision not to expand or develop a country's nuclear programme is popular opinion expressed through the ballot box. That is the major constraint—not science or resources or the inability to secure cash: public opinion provides the obstruction.
The UK should not engage in an accelerated decommissioning of our civil nuclear programme, for all the reasons that have been set out in the debate. However, BNFL's plans—I am not sure if that is the right word—or ideas for building two plutonium-fuelled reactors at Sellafield seem to be wholly unrealistic according to those reasons, quite apart from any others that might be adduced.

Dr. Jack Cunningham: The hon. Gentleman says that the use of nuclear power is not expanding. In 1999,

according to BP Amoco's world energy review, its use expanded by 4 per cent. However, that is merely a difference of opinion between the hon. Gentleman and me.
The hon. Gentleman refers to the BNFL's plan to build two reactors at Sellafield in my constituency. I do not know where he obtained his information, but the company has no plan to build even one new nuclear power station at Sellafield—let alone two plutonium-fuelled ones. He is categorically wrong about that. The company has not even discussed potential plans to build such a station. Yesterday, I held a long discussion with the chief executive of BNFL about that myth. I have a letter from the director of the Sellafield site saying the same thing; there are no plans and there have been no discussions about plans. I hope that the hon. Gentleman will accept that his information is fundamentally wrong.

Mr. Stunell: I am happy to accept the right hon. Gentleman's assurance. My information was not meant to be an extraordinary revelation, because, as he rightly says, it is taken to be common currency. It has been put to me by several quarters, but not by BNFL. Therefore, I am happy to accept the assurances that I have been given. Perhaps the right hon. Gentleman's alacrity in wanting to state the facts clearly before the House only underlines my point that the chances of expanding the civil nuclear power programme in this country are bedevilled by the problem of persuading the public that that might be a good idea.

Mr. Chaytor: Does the hon. Gentleman agree that the trend away from nuclear energy in most liberal democracies is not just a question of public opposition to it—even though it would be interesting to learn how many Members would actively volunteer to have the next nuclear power station built in their constituency? The problem is not just public opposition, because liberal democracies now understand the costs of commissioning, decommissioning and dealing with waste. They have calculated that the cost is unsustainable over the full life cycle of a nuclear power station. In addition, those countries—the United States and Germany in particular—now understand the technology of renewable energy to a far greater degree than ever before and they are investing in hydrogen technologies and photovoltaics.

Mr. Stunell: I thank the hon. Gentleman for that intervention, because his thinking overlaps with mine to some extent.
I referred to liberal democracies and to the problems that are created for nuclear power by democracy. However, the "liberal" element—by that, I mean trade liberalisation—also creates a problem. As the right hon. Member for Copeland rightly pointed out, a future civil nuclear power programme in this country will be seriously handicapped, because the privatisation, deregulation and liberalisation of our electricity services mean that it is not a financially sound prospect to invest in civil nuclear power.
Were the right hon. Gentleman and Ito form a financial consortium and to go to the major banks to ask them to lend us a sum approaching £800 million to build a civil nuclear power station that would be on stream in 10 years' time if we were lucky, the banks would probably tell us that that would not be a sound proposition. If they had


£800 million, they would prefer to give it to us to do something that would gain a return in a shorter time, in which the investment was more likely to be realised and, when that investment was realised, was likely to be profitable.

Mr. O'Neill: I missed part of the hon. Gentleman's speech, but I have been following it since I returned to the Chamber. What would his reaction be if the Government of the day—party non-specific—introduced a carbon tax on energy generation? Surely, the economics of that would be transparent overnight and, given the Liberals' enthusiasm for all things fiscal, it is likely that they would not choose to oppose a carbon tax. However, were they to support one, would they go the extra mile and face the consequences of choosing what might then be the cheapest fuel, namely nuclear power?

Mr. Stunell: Serendipity sometimes works remarkably well. I had reached precisely the point in my notes where I had written about the Ochil case. The economics of producing electricity, like the economics of producing anything else, can be tilted by fiscal and regulatory measures, and the Minister for Energy and Competitiveness in Europe might want to comment on that fact. I am sure that she will also remember that, when we served together on the proceedings of the Utilities Bill, I tabled amendments that would have introduced a carbon tax. Far from our opposing the suggestion, it is good Liberal Democrat policy and I have advocated it in the House.
Given that there will be state intervention—either fiscal or regulatory—to tilt the market in favour of one fuel or another, what will the cost of that be? I would be happy to supply the hon. Gentleman with a copy of my booklet on the topic. However, for an equivalent amount of investment by the state, one can obtain more electricity more cheaply, with less environmental impact and with much more certain support from the public by investing in renewables rather than in nuclear power.
You, Mr. Deputy Speaker, might be becoming impatient at the fact that we are exploring an issue that was not covered by the report, so I shall return to a previous point. BNFL's reputation as a company must be repaired. There is common ground in the House that, over 20, 30 or more years, the problems have followed a repeated cycle. Something happens, it is concealed and denied and that is followed by reluctant disclosure and then a promise of reform and change.
About six months before the most recent incident took place, I visited BNFL at the company's invitation in my role as the Liberal Democrats' spokesman on energy matters. I was given an extensive trip round the site and its facilities and much was explained to me. One of the key points that was made in the several presentations that I heard, including separate presentations from senior management and the trade unions, was that everything had changed and that the company now had a safety culture. I was told that the problems of the past had occurred under different managements and different regimes and before the problems had been understood. The company was absolutely focused on safety. However, I now know that,

at almost exactly the time that I visited the company, people were filling in last year's numbers on the check sheets and creating the current problem.

Mr. David Rendel: Given that my hon. Friend is referring to BNFL's reputation, does he agree that it was an extraordinary Government decision earlier this year that the company should be put partly in charge of Britain's major nuclear arms centre at Aldermaston? Does he not agree that that is yet another good reason for putting off the privatisation of BNFL?

Mr. Stunell: I thank my hon. Friend for his intervention. It was a strange decision and it is a good reason for delaying the public-private partnership.
I now come to the company's business, how that might be related to what the PPP would deliver, and the risks of going down that route. It is time for the company to refocus its activities and to move on from reprocessing. As a constituency Member, as a former Minister and as a former Opposition spokesman, the right hon. Member for Copeland has been a long-term, dedicated and properly committed supporter of BNFL's work. Equally, Liberal Democrats have been sceptical of the steps that have been taken and the investment that has been made. We think that, at least to some extent, we are entitled to say, "We told you so".
THORP has always been an uneconomic project, but it has been justified in a three-legged way. First, part of it is justified because the fuel is coming through. Burning the fuel is then justified because the reprocessing is coming through and storage cannot take place because it would not be economic to stop the reprocessing. For nearly 40 years, we have had a succession of arguments that have been entirely self-reinforcing. We now have a large facility that is not working and is supplying materials that every one of its customers would desperately like not to have to buy but which they have been trapped into buying by contractual arrangements. One could say the same of Magnox business and MOX business—of course, the MOX demonstration facility has been shut down.
What should happen next? There must be ways of involving and using the work force and the technology that has been developed. There is a major worldwide decommissioning industry, not to mention decommissioning on the site in west Cumbria itself. There is a worldwide need for clean-up facilities. There is also a need for a plutonium immobilisation programme because that will solve the problem of the mountain—or the molehill, as the case may be—of plutonium that is being generated across the world.

Dr. Cunningham: Is not this a rather curious argument for the hon. Gentleman to advance? He is saying that BNFL should use its skills, expertise and know-how to get into the huge global market, but a few moments ago he agreed that it was not fit to operate at Aldermaston. Both arguments cannot be right.

Mr. Stunell: Both arguments can be right. My hon. Friend the Member for Newbury (Mr. Rendel) said that the existing company, with its current skills, is an unusual example of a contractor that one would appoint to run the services at a military installation. The issue of decommissioning relates not primarily to military


complexes but to civilian complexes around the world. The right hon. Member for Copeland referred to the former Soviet Union, where leaking reactors in civil nuclear power and associated facilities is a serious issue.
I hope, as the right hon. Gentleman does, that the company will restore its reputation and sell its expertise. The only difference between us is that he thinks that it should restore its reputation and sell its expertise on the next generation of nuclear power around the world, whereas I think that it should restore its reputation and use its expertise on the more significant job of decommissioning, which is, in economic terms, the more realistic option. I do not believe that there is a market for long-term significant expansion in civil nuclear power worldwide, let alone in this country.
For all those reasons, I believe that the prospect of a PPP is—quite correctly—being pushed further and further away by events. Paragraph 19 of the Select Committee's report states:
From the published summary of KPMG's work—
the consultants who considered the whole issue—
it is by no means self-evident that the injection of private sector capital through a PPP is the best way of injecting private sector discipliness,
which are supposed to be the benefit that accrues from the proposed partnership. The report also hinted that KPMG had had its wings clipped so that its study pointed towards a PPP because that was what it was expected to do.
My main point about the merit of the PPP—or, in this case, its lack of merit—is that the merit ascribed to it in the report is that it would introduce private sector disciplines. It is hard, however, especially this month, to believe that those disciplines are the same as a better safety culture. Without taking too many cheap shots, one only has to say the word Rai1track, which did not go ahead with the train protection system, did not get its maintenance techniques right and cut back on its investments, to prove that.
Private sector disciplines are more associated with reducing manpower costs, which usually means fewer staff, cheaper staff and not investing in trained staff. It usually means reduced overheads, outsourcing and the use of cheap contractors. It has already been mentioned that there was an over-reliance on precisely those practices. Private sector disciplines usually mean a search for short-term returns and profits. In addition, the House might be concerned to learn that private sector disciplines mean that secrecy would be brought into play even more often because the information would be commercially sensitive.
For those reasons I have doubts about whether private sector disciplines are really what we need, never mind what we would get from such a partnership. There is a further consideration: diversification will need direction and investment that is probably not available from the private sector.
I conclude by asking the Minister some questions and issuing her some challenges. Will she undertake that, as and when the PPP goes ahead, there will be no loss of openness and transparency? That is not a high threshold to reach, given what we have now. Will she undertake to report back to the House and give the House an opportunity to decide on the issue of a PPP so that, unlike many previous decisions, this decision will not be

smuggled through without proper parliamentary scrutiny? Will she assure us about her understanding of what private sector disciplines mean as applied to this case? Will she also say something about the Government's commitment to diversification, or not, for the future business of BNFL? Liberal Democrat Members believe that only that diversification will allow us to underpin and guarantee the technology base, the manpower and the skills that the company possesses.

Ms Helen Southworth: More than 2,000 people work at BNFL headquarters in Warrington, most of whom live locally. Unsurprisingly, the company's performance and prospects are very important in my constituency and the north-west. Even by excluding investment in external capital and joint ventures, disregarding BNFL's 15 per cent. stake in NNC, which employs 1,000 people at Knutsford, and excluding UrenCO2 which BNFL jointly owns with Dutch and German partners, BNFL contributes £790 million a year to the north-west economy. It has an incredible impact on the supply chain in my region.
BNFL is extremely big business for Britain. Following the acquisition of Westinghouse and ABB nuclear business, about half of BNFL's £2 billion annual turnover now comes from overseas trade. Those overseas contracts are incredibly significant for the British taxpayer because they help to reduce liability costs. For example, THORP contributes more than a quarter of the Sellafield site overheads, at around £250 million per year. Without THORP' s overseas work, much of that cost would fall on the British taxpayer.
My right hon. Friend the Minister and the Chairman of the Select Committee, my hon. Friend the Member for Ochil (Mr. O'Neill), will not be surprised to discover that 1 am particularly interested in BNFL's impact on the region's science base. It is a knowledge-based company and a number of hon. Members referred to its world-leading skills and technologies that are vital for the United Kingdom. BNFL spent £96 million on research and development in the last financial year, which puts it in the top 20 UK companies that are involved in research and development investment.
BNFL is a major player in science in the north-west. It is encouraging universities there to build on BNFL technological development. Developments, such as chemical vapour deposition technology at Salford University, laser scabbing at Liverpool university and UMIST, auxetic materials technology at the Bolton Institute and radiation neutron selectors at Lancaster university have been mentioned, but are worth considering in more detail. On average, over the past five years, the company has sought patent protection for about 40 inventions a year. That adds up to about 240 individual patent applications pursued over the years. The novel technologies include microchemical engineering, auxetic materials, sensing technologies, new methods of separation, laser technology, biotechnologies and supercritical fluid separation.
The company has more than 100 relationships with 35 universities, most of which are in the United Kingdom, through which it directly invests more than £3 million each year. It has established a radiochemicals centre in partnership with Manchester university and a


particle technology centre with Leeds university. It also supports Westlakes postgraduate centre in Cumbria, in the constituency of my right hon. Friend the Member for Copeland (Dr. Cunningham), where nuclear, non-nuclear, environmental, genetic and epidemiological research is undertaken. BNFL makes far more than a minor contribution to the north-west science base. It provides staff and other resources to several university courses and a number of the company's staff hold professorships at UK universities.
BNFL is a high-tech company that is driving Britain forward in the international knowledge-based economy. The prospect of the PPP gives us a timely opportunity rigorously to scrutinise the operations and performance of the company and to ensure best possible value for the taxpayer, within a framework and culture of safety for the public and the environment, while protecting crucial investment in what I and many of my right hon. and hon. Friends believe is the best and most important region in the country.
It is disconcerting that after 30 years in public ownership, it has taken the review of BNFL's status and structure that was decided on early in this Government's tenure, for the shareholders on behalf of the public—Ministers—fully to exercise their responsibilities. The evidence given to the Committee by my right hon. Friend the Minister for Energy and Competitiveness in Europe is extremely welcome, especially her commitment to "shine a light into dark corners" at BNFL. We want the company to succeed and the shareholder on behalf of the British taxpayer must ensure that that happens.
Also welcome is my right hon. Friend's commitment to pursue the achievement of safety and performance targets set for the company, and her undertaking not to take her eye off the ball in respect of BNFL's performance. I am happy to put those statements on the record, because they are extremely important aspects of the evidence taken by the Committee. The Government's reply to the Committee's recommendation that new stringent, but achievable, targets should be set, linked to the company's own objectives and with clear time scales, promises revision in the light of the year's performance and the corporate plan. Will my right hon. Friend state what progress has been made and when the revised targets will be published? We shall continue to take a close interest in the targets, because they can be used to demonstrate whether the company is making progress.
Like many right hon. and hon. Members, I consider the appointment of a new chairman and chief executive who have said that they are
determined to make a real and lasting change
in terms of reforming BNFL's safety and performance to be a significant indicator of improvement. I especially welcome the creation of a new post, director of operations at Sellafield, the holder of which will have responsibility for safety and operations throughout the whole site.
Sellafield has an unhappy distinction: according to their manifestos for elections to the Northern Ireland Assembly, the only policy on which the political parties within the Assembly agree is their demand for Sellafield to cease operations and to stop discharges into the Irish sea.
I have made it clear before to board members and I say now, on the record, that Sellafield has to clean up its act and, most important, it must be seen to do so. The new team promises that safety and cultural issues are being addressed. Its members say that they recognise that safety is not only in the equipment, but in the mind. They have to be sure that it is in the mind of every person working in and monitoring activities of the business, which includes people who are contracted to carry out work for the company. Public confidence, both national and international, depends on their performance in the coming months.
We all know that safety has huge environmental and commercial significance. It has to be like the lettering in Blackpool rock, running all the way through, so that wherever one cuts it the message is clear. BNFL is a global player in the international energy market and making sure that it is a safe and successful player is the responsibility of the owner—the Government.
The Select Committee investigation clearly stated that BNFL has been allowed to go its own way for far too long. For most of the past three decades, it has been more constrained by regulators and pressure groups than by supervision and scrutiny exercised by Ministers and Parliament. British Ministers have to take seriously their responsibility for a business that has great significance to the British taxpayer. 1 am pleased that my right hon. Friend the Minister for Energy and Competitiveness in Europe has put on the record her commitment to doing so.
One of the most significant opportunities that the PPP will bring to BNFL is swifter decision making on required investment. The company is of major economic importance to UK plc. Business lost by BNFL goes overseas, into a market worth more than £20 billion. The system that has been in operation for the past 30 years has proved to be over-long and cumbersome, and too often disconnected from the demands of business.
The company has reported that nearly half of the forty-odd key action points from the Health and Safety Executive Sellafield inspection report have been addressed—and so they should have been. There must be constant and systematic progress within the company in respect of safety management. Concerns about discharges from Sellafield and other BNFL sites, which the Environment Agency expressed to the Select Committee, are critical in every sense of the word. One of the regional general managers told the head of Magnox generation in November 1999 that
the agency has gained an overall impression that the company is not demonstrating sufficient corporate ownership of the problem.
BNFL has already begun to tackle the issue with sweeping changes throughout the company, but progress toward a PPP and the parliamentary and ministerial scrutiny that that generates provides an opportunity to ensure that a vigorous and independent regulatory regime can carry out its intended function to the satisfaction of customers and the general public. We have to ensure constant, regular scrutiny—not examinations once every 10 years. The business needs such scrutiny and the British taxpayer has a right to expect it.
It would be helpful if my right hon. Friend the Minister for Energy and Competitiveness in Europe gave an indication of progress on the decision from the Secretaries of State for the Environment, Transport and the Regions and for Health on the full commissioning of the main


MOX plant at Sellafield. The PPP offers timely decision making, but the company cannot wait: the delay in full commissioning has been costing BNFL £1.5 million a month.
The Government reply stresses the need to take the decision in the light of the latest assessment of the market for MOX and its impact on the economic case for the plant. That is true, but in an ideal world it would be the responsibility of a more commercially attuned board to decide whether it was prudent to press ahead with the opening of the plant and to assess whether the low level of assured customers made the risk of opening worth while. However, we live in the real world: the issue is urgent and requires a decision to be made.
Safety management at Sellafield has been clarified by the appointment of a director of site operations, and a new team of senior independent safety compliance advisers is being appointed. The company is in the process of demonstrating that all 15 of the HSE's recommendations are being met, and Kansai has lifted its trade moratorium on BNFL. Ministers will retain rights and responsibilities as shareholders, at least for the next few years, and the Select Committee requires progress on a decision on MOX.
BNFL's importance to the north-west is not only economic. The company has a large presence in community initiatives in the region: last year, it put £5 million into local projects. I should like to thank the 120 BNFL graduate recruits who worked in Westy, the most deprived ward in my constituency, last month. They have made a real difference. Last Saturday, I visited the community centre at St. Margaret's and saw how they have transformed it. People coming to my constituency surgeries now have a wonderfully pleasant environment in which to wait to be heard.
BNFL makes a great deal of difference in the north-west in many ways. The clean-up across Westy has really improved things for the local community. BNFL is a local and national asset. It needs the active interest of the shareholder and a businesslike attitude from the Government. The taxpayer needs the Government to make timely and effective decisions about the future of BNFL. The company needs to perform excellently in addressing business and safety in the public interest. There should not merely be talk about safety, it should be demonstrated. Systems should be sufficiently transparent to enable people to believe that that is happening.
The debate allows me to refer to the significance of nuclear energy in achieving our Kyoto targets. The reality of weather changes from global warming have been brought home to hundreds of homes in Britain in the past few weeks. There have been headlines such as, "Chaos As Storms Return", "Storms Batter UK", "Sandbag Sales Rise Along With Water" and "Severe Flood Warnings For More Than 40 Rivers".
Wild weather in Britain causes misery to people and destruction to property. In the developing nations, thousands die and hundreds of thousands are made homeless. It is a catastrophe in human and economic terms. Hurricane Mitch, which ransacked Nicaragua and Honduras in 1998, caused more than 9,000 deaths. The two tropical cyclones in Mozambique at the beginning of the year left 1 million people homeless and more than 1 million cattle dead, the main form of the economy and the sustenance of people in that country.
The impact of global warming is not academic. It costs too high a price, and it is people who pay it. Thanks to the evidence of temperature records for 150 years, and information stretching over a millennium from ice caves, corals, tree rings and historical documents, there is no longer a serious argument among scientists about whether the earth is heating up. During the past 100 years, global temperatures have risen by more than half a degree. The seven warmest years on record were in the 1990s, and 1998 was the warmest year in the warmest decade in the warmest century of the millennium.
Higher temperatures mean that more water evaporates from the earth's surface. Water vapour is an energy source. It cranks up the heat engine that drives the weather. It leads to increasingly violent storms and gives greater energy to hurricanes and cyclones. Indeed, the news becomes worse. If rainstorms are more intense in one place, that means that there is less rain elsewhere. Terrible suffering is caused by drought in some parts of the world. Scientists are predicting that some areas will become steadily dryer as the world warms.
Nuclear power accounts for about 25 per cent. of Britain's electricity supply. In the past financial year, nuclear energy in the UK avoided the emission of about 79 million tonnes of carbon dioxide. That is equivalent to 50 per cent. of the carbon dioxide emitted by transport on the roads. The industry is critical in managing the balance between demand for energy and protection of the climate.
As a member of the Select Committee, one of the stranger things that I have seen this year is the Greens in Sweden managing a bizarre political coup. They closed a nuclear power station a decade earlier than planned. What is the most likely way in which they will replace that energy source? The answer is coal-fired production. We must have a realistic energy policy and an investment strategy for the future. Covering our eyes does not make global warming go away, and it is the poorest people on the planet who will pay the highest price.

Mr. David Drew: First, I welcome you to the Chair, Madam Deputy Speaker. I am delighted to be able to contribute to this important debate. Various interests have been disclosed, and I should make it clear that I do not come from the north-west. I come from the glorious south-west. The old Magnox headquarters at Berkeley is in my constituency, and the British Energy plant at Barnwood, which is not a million miles away. Another interest is that I went to Denmark a couple of weeks ago, a trip which was paid for partly by the British Wind Energy Association. It may seem strange that I choose to put that on the record. I do so because the Opposition spokesman, the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb), was also on the trip.
I welcome the Select Committee's report, which is balanced, incisive and thought-provoking. The Chairman of the Committee, my hon. Friend the Member for Ochil (Mr. O'Neill), put the case well. I am sorry that there was a slight disagreement about my view that the UK should have something in particular to offer to nuclear energy. I was not trying to play the nationalistic card. We have an international obligation that I want to see delivered.
I shall not speak for long because I know that other Labour Members wish to contribute to the debate. However, I wish to outline two over-arching themes that


demonstrate why it is important that public-private partnership for BNFL is debated, and to consider that within the context of the wider nuclear industry.
One theme has been well rehearsed already, and that is global warming. That being so, I shall not talk about it at length. However, it is important. There is the integral link between the nuclear industry and renewables. I have always been a supporter of the nuclear industry, and that is not necessarily because I represent many people who work in it. I like to see myself also as a keen supporter of renewables. That is why I went to Denmark. I see my hon. Friend the Member for Bury, North (Mr. Chaytor) in his place, and I think that he and I share an interest of the Globe UK group in that we want to advance renewables. It is important that we try to understand the course that energy provision will take and the way in which the nuclear industry and renewables can be tied within it.
More important is the reason why I welcome the debate and welcome the Government's increasing commitment to the nuclear industry. It is necessary to retain the basic integrity of the industry. That involves the people who work in it, those who could do so and those who may choose to work in it in future. If we do not keep it buoyant and alive, even at a minimal level of provision, we must consider how decommissioning will take place in the UK and abroad.
It is essential that we attract the best, the brightest and the most committed people to the industry. I am saddened when the industry is subjected to easy digs. Its very fabric is attacked, including the people who work in it, who support it and are committed to it. That approach is reprehensible because we need these people. I take any opportunity to support them and to speak on their behalf. We are also talking about valuable sites and it is important to consider how we use them and develop them, and not only for nuclear purposes.
As my hon. Friend the Member for Warrington, South (Ms Southworth) said, we are talking about a massive industry that accounts for billions of pounds each year, and we underestimate that at our peril. It is a key player in the global provision of energy. Perhaps that has not been made clear so far. We can feel rather proud about the way in which we are working with the Americans through Westinghouse and the new ABB link-up. Within the industry, we have an opportunity to influence what is happening in the developed world and in the less well developed world.
The debate is about how we can take BNFL to PPP. My hon. Friend the Member for Ochil, the Chairman of the Select Committee, made it clear that PPP has been delayed, but not indefinitely. I am sure that the Minister will talk about timetables. We need to make that clear, if for no one else, for those who are linked to the company: the work force and other stakeholders, one of whom are the Government themselves.
There is another issue that has not really been brought out: the Government are not only the owner of the company, but the regulator of the industry. It is not crucial to this debate, but it is important that we again put on record that there are not many industries that have two regulators: in this case, the Health and Safety Executive and the nuclear installations inspectorate. There are occasions when tensions between the regulators can grow.
One of the things that the Minister might want to comment on is: if we move towards the PPP, what will be the regulatory outcome and how will the regulator work in relation to the new company?
Quite simply, the industry needs to be carefully regulated. We know already that a degree of argument has been advanced—I think that it is fair—about the need for greater transparency. We must build on that, but that can be done only if we have an effective relationship between the company, industry and regulator.
Increasingly, there is a debate about what way forward we take our energy policy. I feel strongly that one of the things that the Government could do—this was a failure of the previous Government—is to make clear what our energy policy is, and what the different component parts should be. Again, I pay tribute to the Trade and Industry Committee. In one of its earlier reports, it intimated how crucial it was that we took that debate forward and were clear about the different component parts.
We cannot have it every which way. We must be clear that, if we are going to move from the current component parts—approximately speaking, one third is nuclear, one third is fossil fuel via coal, and one third is fossil fuel via gas, with a small amount made up of renewables; thankfully a growing amount—and to look forward to the next 20 to 30 years, we must make up our minds. If we are not going to be able genuinely to get renewables into some acceptable framework, so that they are a genuine contributor of some size to energy provision, we will have a massive shortfall. The advantage of nuclear is that it gives head room, not just in this country, but in the wider world, on how to think our way through the way that we need to go.
I totally oppose the idea that gas alone can pick up the shortfall. There are projections that, if we do not get it right, gas will grow to potentially 60 per cent. of provision. For all sorts of reasons, it will not deal with the global warming problem or, more particularly, with the problem of our misuse of a valuable resource. We need to recognise how—if can move forward—nuclear has an important part to play, but we need to link that with renewables.
I would like to see the day—I have mentioned it to the company, so it is nothing new—when, alongside nuclear provision, we have wind turbines and perhaps some biomass not far away, linking that with solar energy, so that we can genuinely see that energy can be provided efficiently, effectively, safely and in an environmentally acceptable way. If we can do it in this country, it can happen elsewhere.
From the company, we are looking for a clear statement of its strategy. In its last report, it provided that. It has begun to reveal the ways in which it wishes to take things onward. As has been mentioned, it has a new chairman and a new chief executive. It is restructuring itself, so that it can move forward in such a way that it achieves not only the trust that needs to be built, but the efficiency that it needs to be able to prove. In that way, it can show that the industry has a future.
This is also about the way in which the Government have to respond. As I have said, the Government wear several different hats. They are not just the owner of BNFL, but BNFL's regulator and the employer of many thousands of people. That puts many obligations at their door. As I have intimated, they must also look at their international obligations.
We can be critical about some of the things that have happened in the nuclear industry, but one of the things that we have done that is pleasing—again it is not widely known—has been to help the Ukrainians, formerly the Soviet Union, through the disaster of Chernobyl. I know that the Government have made available considerable sums of money to help the industry there to work through its obvious difficulties.
We cannot pretend that, if we do not get our energy policy right, the rest of the world, particularly the less developed world, can do anything other than copy our mistakes. Therefore, it is important that we have—as we are having today—a full and fruitful debate and look at the ways in which we can genuinely move the debate forward, not just here, but internationally.
I want us to have high environmental standards. The whole point about the industry is that, although it can be criticised in many respects for some of the things that have gone wrong, anyone who goes on to a nuclear site can never fail to be impressed by the degree of safety, the security and the way in which it takes seriously its environmental obligations. We must recognise that we must meet the obligations under the Ospar—Oslo and Paris—convention. We must deal with the problem of technetium and so forth, but that can be done only if the industry is given time and space to move forward appropriately, rather than being continually pushed down and out.
That is the obligation that we have. It is an obligation that we should have to the work force and to the rest of the stakeholders. That is why it would be useful if the Government, even if they would not go as far as to say that they would consider new build, looked at the options—in the next 20 to 30 years, we must get an effective policy together in terms of energy provision. That is something that we can begin to do now. I am sure that the Minister will think hard about that and make an appropriate response.

Mr. David Chaytor: I welcome you, Madam Deputy Speaker, to your new appointment.
I found the Select Committee report extremely interesting. It reflects great credit on my hon. Friend the Member for Ochil (Mr. O'Neill) and his colleagues on the Committee. I pay tribute to him, to the way in which he introduced the debate, and to the measured way in which he balanced the various arguments that must be considered.
My first point is little to do with the BNFL PPP itself; it is to do with the process by which Parliament has considered the issue of BNFL and the whole nuclear industry over many years. I find it remarkable that, given the size of the industry, the number of people employed in it and the economic impact in many parts of the United Kingdom, particularly the north-west, where my constituency is located, there has been so little debate about and scrutiny of BNFL and the rest of the nuclear industry in the past 30 years.
I think that the rot set in—it must be said—in 1979. In the 1970s, under Governments of both parties—the 1970–74 Government and the two Labour Governments who followed—there was considerable debate about the industry, but once we got into the 1980s it was almost as if Government and Parliament abdicated their

responsibility completely. That is important. It says something about the way in which we as a nation and as a Parliament deal with questions of science. I would draw analogies with the way in which we have dealt with BSE, and the way in which we are struggling to deal with GM technology, and perhaps even with stem cell research.
There are serious lessons for the Government—who are, I know, taking the matter seriously—for Parliament and for all of us as Members of the House about how we deal with scientific issues. We have tended to find them difficult and to run away from them. We have tended to assume that science was best dealt with by the scientists. That has been the root cause of many of the problems of public policy in recent years—certainly in the case of BSE—and of many of the difficulties that BNFL and the nuclear industry have experienced.
There is a wider issue relating to public policy. In Britain, our tendency is to exclude debate once a line has been agreed. If we look back at the history of BNFL, particularly the history of THORP and reprocessing, there is no question but that a consensus was established, arguably driven by the needs of the Ministry of Defence to generate stocks of plutonium in the earlier years of the cold war. The consensus was established by the figures that mattered—the scientific establishment, the MOD and the sponsored department of the Department of Trade and Industry—that THORP and reprocessing were the way forward.
Because that was an investment of such enormous size and scale, even though other voices were arguing against it, the juggernaut of the political, military and industrial establishment could not be stopped. If we look back now over the past 20 or 30 years, we will see that that was one of the most gigantic mistakes of public policy that any Parliament has made. If we were going back to the 1970s, would we go ahead with THORP and start again with reprocessing? I suspect not. There are serious lessons to be learned about the way that we, as a democracy, handle complicated issues of science.
Representing a constituency in the north-west, I know that this is an important and sensitive issue for many of my hon. Friends, particularly my right hon. Friend the Member for Copeland (Dr. Cunningham). I have the luxury of not having a nuclear establishment in my constituency, although I have companies that supply the nuclear industry. That luxury perhaps allows me to be a little more detached and dispassionate about some of the issues relating to BNFL than might otherwise be the case.
There is an enormous paradox about BNFL. As many of my hon. Friends have said, the company undoubtedly contains one of the largest concentrations of scientific expertise anywhere in the world. As a hugely enthusiastic supporter of British science and of the need continually to extend the boundaries of scientific research, I want that body of expertise to thrive. The proposal that we are considering, for a PPP with 51 per cent. of the shares remaining with the Government, is an effective way of achieving that, subject to certain conditions.
However, the industry has been incredibly dishonest, hugely damaging in environmental terms, and hugely profligate with public funds. We must recognise that billions and billions of pounds of taxpayers' money have gone into subsidising the nuclear industry over the years, and will continue to subsidise it throughout the next century. That is an extremely important point. It explains why BNFL has liabilities of £27 billion in its accounts.
There is, therefore, the paradox of that aspect of the industry, and the enormous technical expertise attached to it, which is vital to the future of this country, to the many employees in the north-west, and, to many countries throughout the world, because nuclear clean-up and decommissioning is a burning issue not only in the United Kingdom and parts of western Europe, but particularly in the United States and, most worryingly of all, in the former Soviet Union. British Nuclear Fuels has the potential to be a leading player in the programme of nuclear clean-up and decommissioning that is getting under way.
I do not believe—in this, I agree completely with the hon. Member for Hazel Grove (Mr. Stunell)—that the future of the company lies in reprocessing or in the international plutonium trade. The Select Committee report identified some of the assumptions on which the nuclear reprocessing industry was initially established: the need for plutonium because of the cold war—that may not have been specifically mentioned in the report—the expectation that the price of uranium would rise, and a scenario in which nuclear power would continue to expand, possibly because of concern about oil prices after 1973–74.
One by one, all those assumptions have been proved obsolete. In 2000, it is difficult to see the rationale for nuclear reprocessing. Why do we take spent nuclear fuel from power stations at the other end of the planet, ship it across the world, separate it out and store the plutonium in the north-west of England? I understand that that gives us some advantage in terms of foreign currency, and that it creates employment for many people in the north-west, especially in the constituency of my right hon. Friend the Member for Copeland, but we must ask ourselves what we are doing it for, particularly now that the consensus is that plutonium is not an asset, but waste.
The end of the cold war changed the value of plutonium at a stroke. That is why the Science and Technology Committee of the House of Lords last year recommended that much of the British plutonium stock should be declared waste, with only a small strategic reserve being kept.
We have spoken of mountains of plutonium and molehills of plutonium. Let us get the facts right. We currently have a stock of 60 tonnes of plutonium. By 2015, that stock will increase to almost 120 tonnes. It is all in the north-west of England, on the edge of the Lake district, and it is the biggest concentration anywhere on this planet of the most dangerous substance known to human beings.

Dr. Ladyman: I must tackle my hon. Friend on that point, which he has mentioned twice. There is absolutely no objective criterion according to which plutonium can be described in that way. I can give him the name of naturally occurring, growing substances called lectins that are even more toxic than plutonium. He exaggerates. If he wants constructive scientific debate, as he said earlier—and I fully agree with him about that—we must conduct it on the basis of the facts, not on the basis of exaggeration.

Mr. Chaytor: If plutonium is not dangerous, why have all the leading nations signed the nuclear non-proliferation

treaty precisely to reduce stocks of plutonium and to eliminate the risk of the theft of plutonium and the obtaining of plutonium stockpiles by terrorist groups? Other substances may well be equally dangerous, but plutonium remains one of the most dangerous substances on the planet, which all the leading nations of the world, including the United Kingdom, are determined to ensure is stored safely to avoid proliferation. It is difficult to appeal to other countries to control their stocks of nuclear weapons while we generate more and more stockpiles of plutonium.
Reprocessing does not have a future. The Select Committee's report is right to recommend that the Government make their policy on reprocessing clear. It would have been better had the previous Government done so, in which case we might not have been in quite the mess that we are. On the other hand, it would make sense for the Government not to do that, and simply to allow market forces to take their course. If anything will bring the reprocessing industry to an end, it is the partial privatisation of BNFL.

Dr. Jack Cunningham: My hon. Friend talks as though successive British Governments had somehow been reckless. With regard to the nuclear non-proliferation treaty, all the safeguards in respect of that and Euratom are in place at Sellafield and have been for a long time. My hon. Friend also talks as though only Britain did reprocessing, and that if we stopped doing it at Sellafield, reprocessing would somehow go away. He should bear in mind the fact that the Japanese have just awarded 650 tonnes worth of reprocessing business to the French at Cap de la Hague.

Mr. Chaytor: I understand that perfectly well. I understand that only Britain, France and Japan, and possibly Russia, are interested in reprocessing, or see it as a valuable activity. It is significant that the United States withdrew from reprocessing some years ago. In Japan, the question of reprocessing is hugely problematical. The Japanese have been attempting to build their own reprocessing site for many years, and it will be some years before it is completed. Public opinion in Japan, as in western Europe, is steadily turning against the further expansion of nuclear power, and is certainly increasingly critical of the reprocessing industry and the international plutonium trade.
I do not deny the points that my right hon. Friend makes. I simply say that we must put the matter in its international context. At the moment, the United Kingdom and France are the only countries seriously committed to reprocessing. I suspect that market forces in the United Kingdom will gradually lead to the winding down of the reprocessing industry. Part of the evidence for that is the memo from British Energy in its submission to the Committee's inquiry, and the further briefing papers that British Energy distributed before the debate.
There has been some criticism of British Energy. I hold no brief for British Energy, but there has been some criticism to the effect that it must understand that it cannot abrogate contracts. In its defence, that is not what I understand it to be saying. It is saying that it wants to renegotiate contracts. There are perfectly respectable precedents for the renegotiation of contracts, particularly when there are mutual advantages.
That brings me back to the point made by my hon. Friend the Member for Ochil in reply to my intervention, when he said that the comparative costs of reprocessing and storage are matters of opinion, not evidence. I must disagree with him, because there is now a body of evidence, part of which was produced by Dr. MacKerron, who made an important submission to the Committee and whom my hon. Friend mentioned earlier in glowing terms.
Dr. MacKerron's work at Sussex university has demonstrated that the renegotiation of the reprocessing contracts as storage contracts would have a mutually beneficial result. There would be money for British Energy and for BNFL. In that sense, renegotiation of existing reprocessing contracts seems to be a win-win situation. It is a sign of our collective political and industrial inertia that we find it so difficult to accept criticism and to accept that we have made mistakes, so it is difficult to turn policy round, even when the facts are staring us in the face.
I understand the urgency with which hon. Members who support the Sellafield MOX plant want the Government to respond, and the interest in the matter. There have been a number of consultations and inquiries into the viability of the MOX plant. I understand that the Government's position is that approval for the MOX plant, which is the responsibility of the Deputy Prime Minister, will be granted purely according to the criterion of commercial viability. As of four weeks ago, the MOX plant was not commercially viable. BNFL had committed £300 million to building it in advance of obtaining authorisation to operate it.
That in itself raises interesting questions about the provisions of the Radioactive Substances Act 1993. It is astonishing, and I cannot think of a parallel in any other industry. What other industry would allow a company to build such a plant without approval to operate it? The sum of £300 million was committed, but, because of the errors at the MOX demonstration facility, and the falsification of fuel data, we are committed to spending another £100 million to bring fuel back from Japan.
Huge amounts of what are essentially public funds have been committed in advance of any evidence that the MOX plant will be commercially viable. I recollect that the inquiry by the PA Consulting Group argued that there was a commercial future for MOX only on the assumption that the £300 million initial capital investment would be regarded as sunk costs. That is crazy economics, and all too typical of the accounting procedures in British Nuclear Fuels for many years.
I understand the reasons for the company's strenuous efforts to secure the Japanese business, but it would be amazing if it got the 100 per cent. of contracts that it needs for commercial viability. Even if it succeeded, and announced in a few weeks that it had a full work load for MOX, that contracts had been signed and sealed and that the Government should therefore grant approval, there is an overwhelming argument against the international plutonium trade that MOX represents.
The issue should be debated more widely, and the public should be fully aware of the implications of the plutonium trade. We are shipping spent fuel from Japan to the United Kingdom, separating the uranium and the plutonium, mixing them together in ceramic pellets, and shipping it back halfway across the planet so that it can be burnt again in Japan. It then generates more spent fuel

and more high-level waste, which is shipped back to the United Kingdom. That is the energy policy of the madhouse. In relation to the environment, or a rational energy policy, there is no argument for constructing such an elaborate, expensive, complicated and dangerous process simply to keep the nuclear industry going.
Let us consider the Oslo and Paris convention, which some hon. Members have already mentioned. Every member of the European Union in the Ospar convention—except, understandably, Britain and France—voted for the recent recommendation that reprocessing should be phased out. We should bear in mind the strength of feeling against reprocessing in all the other European countries. It is not surprising. Countries such as Iceland and Norway depend to a large extent on the purity and clarity of the waters of the North sea, because so much of their economy is based on fishing. When they find that, hundreds of miles north of Sellafield, technetium-99 is contaminating their fish stocks, it should not surprise us that they support an end to reprocessing. All the parties in Northern Ireland, and Ireland itself, also support that, because of the impact on their waters and fish stocks.
Let us consider the BNFL response to Ospar. When the Ospar conference at Sintra in Portugal reported its decision to aim for discharges that were close to zero by 2020, the management of BNFL issued a statement that that would be no problem. It said that it was possible to achieve that through abatement technology, and that it intended to meet the target. However, 1 understand that more recently, the BNFL position has changed, and that its submission to the current Environment Agency consultation on discharges takes a more hawkish line. It claims that it cannot possibly meet the Ospar requirements on discharges. I should be grateful if my right hon. Friend the Minister could comment on that; if she cannot do so now, perhaps she will say something later. The BNFL view of Ospar is important. Can the company comply, and what will it cost to do so? If it says that it cannot, where does that leave reprocessing?
Several hon. Members have argued that we should continue, or expand, the use of nuclear energy because of the Kyoto protocol and because burning uranium does not directly lead to CO2 emissions. That is perfectly true, but the fact that there is no direct link does not mean that the nuclear industry is not responsible, through its other processes, for a considerable volume of CO2 emissions. We need to view the situation in a wider context.
I am sceptical about the sudden conversion of BNFL and other parts of the nuclear industry to being clean and green. The industry's history shows that different justifications have been used in different decades to defend the industry's future. As each decade passed and the initial justification was undermined, it was quietly dropped and a new justification emerged. Arguing that nuclear power is needed to meet the Kyoto targets is the latest of those justifications.
Interestingly, when the conference of the parties to the Kyoto protocol meets next week and the week after in The Hague to discuss the precise ways in which the protocol will be implemented, the EU position in the negotiations on the clean development mechanism, which is supported by the UK Government, will clearly state that nuclear energy has no role whatever in that mechanism. I welcome that and hope that our and the EU negotiators will stick to it. It clearly demonstrates that the understanding throughout the EU is that although the


nuclear industry provides fewer direct CO2, emissions, it does not represent a solution to the problem of reducing carbon dioxide and other greenhouse gas emissions.
We briefly discussed the renewable nature of nuclear energy. Some people argue that nuclear energy is renewable, but they forget that its renewable dimension involves the fast breeder reactor. Research on the fast breeder reactor stopped in Britain in 1994 and in France shortly thereafter. Worldwide, only Japan continues with such research. Conceivably, the fast breeder reactor could, perhaps in many decades' time, produce a completely renewable form of nuclear energy.
When it is argued that renewables cannot take the place of nuclear energy, we should remember that nuclear energy currently provides 20 to 25 per cent. of our electricity. The Government have a target of getting 10 per cent. of electricity from renewables by 2010, by which time the closure of the Magnox stations will be reducing the total proportion of power generated by nuclear energy. The likely scenario in 2012 or 2013 is that there will be no reason why we cannot meet our renewables targets. In view of the enormous increase in renewables technology in recent years, I suspect that those targets will be easier to meet than was previously thought. By the early years of the next decade, the proportion of electricity generated by nuclear energy and that generated by renewables could be more or less the same.
We must accept that nuclear energy has a role to play, but that it is likely to be significantly smaller. The growth in energy use will unquestionably involve renewables, hydrogen, photovoltaics, biomass and the exploitation of wind and waves. To defend, or to justify an expansion of, the nuclear industry on the ground that renewables cannot replace the existing proportion of electricity generated by nuclear energy is simply not sustainable.
I support the Government's approach to BNFL. They deserve enormous credit for advancing the PPP plan, which is not revolutionary—it was envisaged when the company was established under the Atomic Energy Authority Act1. The 51–49 per cent. split meant that primary legislation was not necessary to establish such a partnership, which meant that the matter could be approached slightly more secretively than would otherwise have been the case. I hope that our Government will not do that, and that there will be ample opportunity to debate the details of the partial privatisation in the months ahead.
The key question is: what is going to be privatised? My concern is that when the PPP is constructed the taxpayer should not be left with all the liabilities. The temptation, especially if there is little interest in the City because of the enormous liabilities attaching to BNFL, will be to do some hiving off and separation. The taxpayer will pick up the liabilities and the new PPP company will gain all the assets and lucrative work for the future. In my view, and in the view of an increasing number people across a wide spectrum, the future for BNFL is not in reprocessing, the international plutonium trade or attempting to expand what is rapidly becoming obsolete technology, but in the massive task of nuclear clean-up and decommissioning across the world.
If I may come back to where I started, I believe that there will be a reduction in nuclear energy in the years ahead. I do not want nuclear technology to be shut

down—far from it; keeping all scientific options open is far too important for that. Prolonging the life of 50-year-old nuclear reactors will not significantly increase our scientific knowledge. Nevertheless, I want to maintain those high level skills in Britain and I want British scientists to work on ways of finding more efficient and safer forms of nuclear power, if that is possible. I am sceptical about that, as there have been 50 years of nuclear power, and unlimited public funds have gone into it. Although I want to keep that option open, I recognise that the way forward for the company is to focus on clean-up and decommissioning work.
Finally, I shall comment briefly on one or two details in the report and ask for a response from my right hon. Friend the Minister. First, paragraph 45 on page xix states:
In the course of our abbreviated inquiry, we have not sought to explore the relationship between BNFL and the Ministry of Defence…and its agencies.
That is an enormous pity, as the original driving force for BNFL was the relationship with the Ministry of Defence, which is one of the most interesting and secretive areas of public life. Sooner or later, someone should cast a little light on that relationship. The MOD's imperative of generating a national plutonium stockpile, long after that was justified by the demands of the cold war—if it ever was—has led us into an enormous error of public policy through the focus on reprocessing.
Secondly, paragraph 47 on page 20 refers to the study by Touche Ross in 1993, which was supposed to be among the evidence that led to the approval of THORP. As I recollect, the Touche Ross study did not exist, and nobody has proved that it did. People working under the auspices of Touche Ross may have considered such matters, but there was no written report that could conceivably be described as a study. I should be grateful if my right hon. Friend would comment on that.
Paragraph 72 on page xxvi states:
Reprocessing of Magnox fuel—to which it is now …generally accepted that there is no safe alternative.
I do not think that that is true, as a number of scientists accept that it is possible to store Magnox fuel, although not indefinitely. I understand that Magnox fuel is stored on at least one of the nuclear sites in Britain—presumably safely.
I am interested in a contradiction in the report. Section C, on page 81, mentions the THORP order book and refers to
over half of the second decade quantity contracted,
whereas on page 103 it says that that amounts to a
little over 40 per cent.
I think that the "over half' reference is the figure from the company, and the "little over 40 per cent." figure is from Dr. MacKerron of Sussex university. It would be helpful if at some point—I am sure that my right hon. Friend will not be able to deal with it tonight—that contradiction between the exact quantity of fuel contracted could be resolved.
The report has done a service to the cause of open debate about energy policy in the United Kingdom. It has done a service to the company, because the secrecy in which it has operated for some years has done it and the industry no good. I echo the call by other hon. Members for greater transparency and openness in the future.
The report is a substantial and measured document. It forces the Government to announce their policy in various key areas. We cannot merely leave matters to drift, and I


welcome the fact that the Government have now taken their shareholder responsibilities seriously. I hope that my right hon. Friend will give detailed responses to all the points that have been raised when she replies to the debate.

Dr. Rudi Vis: I add my congratulations to you, Madam Deputy Speaker.
I enjoyed listening to the Chairman of the Select Committee on Trade and Industry, my hon. Friend the Member for Ochil (Mr. O'Neill). I am pleased to be called to speak in the debate because I have strong feelings about these issues, and because I have been vilified in many BNFL internal memorandums concerning the protracted fight about the parking of carriages containing spent nuclear fuel in Cricklewood in my constituency.
I shall make a few introductory comments to explain my views about the proposed public-private partnership. BNFL does four things: cleaning up and decommissioning, storage, research and nuclear reprocessing. The Committee's ninth report spells that out. It is good at cleaning up and decommissioning and research—it could be a world leader in that highly profitable area of its work. It could do better and more on storage. However, it is without doubt guilty of covering up errors in some of its work on nuclear reprocessing. It treats the public with contempt; it has compromised safety and security; it cheats and worse; it is secretive; and it suffers from a corporate arrogance that has no match in this country or abroad. It is also apparent that the nuclear installations inspectorate—the industry's regulatory body—is weak.
BNFL's public affairs department, which advises the board on how to pull the wool over the public's eyes—and, I believe, over the Government's eyes—has a budget of £18 million a year. I am sorry that my right hon. Friend the Member for Copeland (Dr. Cunningham) disagrees with me, but I believe that the jury is still out on any real improvements in management.
If I had to declare an interest, it would be that I am a lifelong member of the Campaign for Nuclear Disarmament, and I am proud of it. However, it may come as a surprise to learn that I wish an open and accountable BNFL the very best, but only on condition that it stops nuclear reprocessing at the earliest opportunity. In other words, if that condition were met, I would vote in favour of a public-private partnership for BNFL, but, if it were not, I would vote against it. I believe that, although it is the Government's responsibility to have total control over nuclear reprocessing, fundamentally—as we heard earlier in the debate—there is no rationale for nuclear reprocessing.
My entanglement with BNFL started in late summer 1998. I was informed through the grapevine—not directly—that BNFL would start parking spent nuclear waste in trains in sidings in Cricklewood. I was alarmed about that, as were those who lived there and would see the trains parked 30 yd from their homes. I therefore contacted BNFL at its stall at the Labour conference and I invited its representatives to come to a meeting in my constituency for discussions.
BNFL's representatives came to the meeting, on 13 October 1998. However, they came not to discuss the matter, but to railroad it through. I told them exactly what I thought of them, and I had the full support of a very

angry meeting. Since then, thousands of residents have become involved in the matter, under the magnificent leadership of Mrs. Linda Hayes, a local resident who has worked tirelessly on the issue for many years. The anger was enhanced because clearly we had not been told the truth.
I shall explain how I believe that events developed, and, later, I shall ask my right hon. Friend the Minister some questions on some details. The English, Welsh and Scottish Freight Rail Company—EWS—was born of the chaos created by the Tories on privatising rail freight. EWS won the contract to transport spent nuclear waste via its compound in Willesden, in north-west London, to Sellafield. Some time later, BNFL set up a wholly owned subsidiary company—Direct Rail Services, or DRS—which, most surprisingly, won the contract to transport spent nuclear waste, beating EWS.
The EWS board must have smelt a rat, because it suggested to BNFL and to DRS that it was minded to throw DRS out of the controlled compound in Willesden. BNFL panicked and, in a hurry, found wholly unprotected, massively large railway sidings in Cricklewood. BNFL thought that it could just walk over the people in Cricklewood, and merely informed the wrong Member of Parliament—the hon. Member for Brent, East (Mr. Livingstone), who is now London's Mayor—of what it was going to do. To this day, the hon. Gentleman denies that he was informed by BNFL.
Residents in the area established Cricklewood Against Nuclear Trains—CANT. After feverish activity led by Mrs. Linda Hayes, and with exceptional support from many others, including me, BNFL panicked again and asked us if we would agree to discuss matters with an intermediary green group, the Environment Council. We agreed to discussions, but we were not going to give in. After a year and a half of meetings, in March 2000 BNFL withdrew its plans to park spent nuclear waste trains in Cricklewood. Cricklewood Against Nuclear Trains was renamed, Communities Against Nuclear Trains.
BNFL withdrew to the former EWS compound in Willesden—about which I shall ask a question in a moment. I do not know what price BNFL had to pay to EWS to persuade it to allow it back into the Willesden sidings. However, to my mind, no community should have to put up with the fear of such trains being parked in densely built-up urban housing areas. Those trains should not be allowed to pass through London, or, for that matter, through any urban area. Better still, we should get rid of nuclear reprocessing, which is totally unnecessary. BNFL would be a healthier and more profitable company if, over time, it were to abandon all reprocessing. There are now national negotiations to reach agreement on how to improve BNFL's environmental performance.
Both BNFL and CANT learned a lot, and, after the Cricklewood saga, we parted much wiser, friendlier and relieved. Therefore, it was with surprise that, a few months later, I received a whole wad of internal BNFL memorandums, which were probably leaked by a concerned BNFL employee. I was mentioned many times in those memorandums, and not in a very flattering way. It is now my particular pleasure to record the contents of only one of those bizarre memos in Hansard. It was sent by Mr. Rupert Wilcox-Baker, the public relations head of BNFL, to the then BNFL chairman, Sir John Guinness. It is dated 16 March 1999. It is, as I have said, only one of many: I have them all.
I shall have to make one change when I read out the memo. A Member of Parliament is mentioned by name, so I shall have to refer to him by his constituency.
The memo reads:
Thank you for your memo dated 15 March concerning Rudi Vis MP.
We have had a number of meetings with Rudi Vis and he has made it very clear that he is determined to get us out of Cricklewood and to stop us transporting spent fuel.
The memo goes on to say that the "insight" of my hon. Friend the Member for Ellesmere Port and Neston (Mr. Miller)
into Vis's rationale is interesting but I suspect what he is seeing is a hangover from Vis's "old Labour" background. He is a long-time member of CND and has stated privately to us his abhorrence of all things nuclear. Regarding the suggestion that we try to get a senior local Jewish figure on side and then arrange a meeting, I have some doubts. However valid our arguments and those of the potential third party advocate I suspect Vis will find it hard to alter his position. All we might hope for is perhaps the development of a more respectful hostility!
Whilst Rudi Vis is not himself Jewish his father helped Jewish families during the last war in Alkmaar, Holland, where Vis was born in 1941. Therefore, with that in mind and the make up of his constituency the Jewish influence will be strong. I would propose that we ensure that this section of the local community is fully represented in the dialogue process and I will check this point with the Environment Council which is managing the process. In this way, if we can satisfy the local community representatives, through the dialogue process, then this should have included all important sectors of that community.
Will the Minister tell me why BNFL seems to need £18 million annually for its public affairs department, and whether the Government can call in internal memos from that department? Will she also tell me whether she can look into why Direct Rail Services, a wholly owned subsidiary of BNFL, won the contract over EWS—without having had any way of carrying out the work before—to transport spent nuclear waste? Finally, will she tell me what BNFL/DRS now pays to EWS following the return to Willesden?
I am not the only Member of Parliament whom BNFL has secretly tried to undermine. I wonder what the costs of such activities have been to BNFL, but I am not annoyed. I wish BNFL the very best—with the proviso that, if we had come to the end of the line in regard to nuclear processing, we would become a much safer country in a much safer world.

Dr. Stephen Ladyman: I, too, welcome you to the Chair, Madam Deputy Speaker.
Perhaps I should begin by declaring an interest. I have no constituency interest, but in my younger days I was a radiation biologist, and my PhD is in radiation in the environment; so I think I can claim some technical knowledge of some of the issues we are discussing.
My hon. Friends the Members for Bury, North (Mr. Chaytor) and for Finchley and Golders Green (Dr. Vis) were right to speak of the need for openness and debate, but we must have that debate on the basis of the facts, without exaggeration, and ensuring that everyone knows all the issues. I do not know about the shunting of trains in Cricklewood, but I can tell my hon. Friend the

Member for Finchley and Golders Green that the moving of radioactive material through his constituency poses zero risk to any of his constituents. I can also tell him that radioactive materials have been transported for more than 16 million miles over the last few years without causing one serious life-threatening incident.
My hon. Friend the Member for Bury, North spoke of the threat posed by technetium in the North sea. An eminent Danish scientist has calculated that if a Danish fish-lover ate 50 kg of fish and 20 kg of shellfish each year that had been caught in the Danish seas, where the concentration of technetium is highest, he would experience an annual radiation dose of 0.14 millisieverts. One is exposed to 0.3 mSv of radiation by staying in a Danish house for one hour. That is the relative risk from technetium in the seas around Scandinavia.

Mr. Chaytor: Will my hon. Friend give way?

Dr. Ladyman: No, I am afraid that there is too little time.
My hon. Friend the Member for Bury, North said that plutonium was the most toxic chemical known, but that is simply not true. I can extract from kidney beans a compound that is more toxic than plutonium, but people will still be happy to eat kidney beans with their chilli con carne in the restaurant tonight.
There is no doubt that plutonium is toxic, but for people to be affected they need to be near it, or ingest it, or breathe it in. Alpha radiation has such a short range that it cannot even pierce skin. If we are to have the rational debate that this matter deserves, we need to place such facts in the public domain.
Before I go on to the main points in my speech, Madam Deputy Speaker, may I apologise to the House on behalf of my hon. Friend the Member for Dumfries (Mr. Brown)? Parliamentary business means that he cannot be here tonight, but his constituents at Chapelcross are very anxious that new nuclear capacity be built there, as the local Magnox station is licensed only to the end of the decade.
I want to focus on the environmental issues. My hon. Friend the Member for Bury, North said that there were no environmental justifications for nuclear power. I completely disagree, and a look at the royal commission report into climate change will show why. The report presented four ways in which we might address the problem of global climate change by 2050.
First, the report suggested that this country hold energy consumption at 1998 levels for 50 years. That would be a huge task, but it is the easiest of the four scenarios that the report postulates. Even so, it requires that nuclear power be used to generate some of the energy that would be needed in 2050.
Two of the other three scenarios would require a reduction in energy consumption of 36 per cent. from the 1998 level. No one has any idea of how that might be done. One of those two scenarios proposes that, if we did not use nuclear power to provide the needed energy, we would have to increase the use of renewables by a factor of 18—and no one has a clue about how to do that.
As an environmentalist, I can tell the House that such an increase in the use of renewables would have environmental consequences. Tidal barrages create huge environmental problems: silt settles and fish die when the energy is taken out of waves.

Mr. Malcolm Savidge: Will my hon. Friend give way?

Dr. Ladyman: I am afraid that there is too little time left.
The royal commission's fourth scenario does not require nuclear power, but it does call for a reduction in energy consumption of nearly 50 per cent., and even the commission said that it could not see any way to achieve that.
Anyone who has studied global warming has accepted that, on the balance of probabilities—and some scientists believe that the matter is beyond reasonable doubt—global warming is caused by greenhouse gases. We can meet our Kyoto reduction targets only by retaining a significant nuclear element in our energy production.

Mr. Savidge: Will my hon. Friend give way on that point?

Dr. Ladyman: No. I am sorry, but my hon. Friend the Member for Bury, North spoke for 34 minutes. That is why I must rush now.
The simple fact is that, if we want to tackle global warming, we have to have a nuclear element in our energy mix for the foreseeable future. That means that we need new nuclear build.
So far as the public-private partnership is concerned, we have in BNFL a world-leading team. I am the first to say that it has made some huge mistakes. I have been saying for the past two years that its watchword should be"openness". BNFL should tell us everything in future. If it tells us that it has made a mistake, that is bad; if Greenpeace or some other environmental group finds out and tells us, that is a disaster. BNFL has to be open in everything that it does. We have to get the private discipline into that organisation so that we have some real, solid, good management techniques to make sure that it is building for the future.
Not only do we need BNFL's expertise if we are to replace our nuclear capacity, but there is a huge task to be performed in the former Soviet republics. There is a bill to be picked up for cleaning the former Soviet countries of £1 billion. By that I mean a British billion, because when I was little I was told that a billion was a million million and then the Americans said that it was a thousand million. Well, I am talking about a million million pounds worth of clean-up to be done. We have only just scratched the surface. The only company in the entire world with the expertise to show us how to do that and to capitalise on it is BNFL.
For goodness' sake, let us start moving on building the public-private partnership. Let us accept that many of the errors discovered at BNFL were discovered because of the preparations for the PPP. Let us make sure that BNFL is equipped for the future, to make sure that we really can have the option of new nuclear capacity, because I believe that it is the only way to address global warming.
Global warming will not kill the environment of the world. It will happen because we leave environmental policy either to the ostriches, who would like to pretend that global warming is not caused by greenhouse gases, or to the witch doctors, who refuse to accept that science and technology is the way to think ourselves out of this problem.

Several hon: . Members rose—

Madam Deputy Speaker: I call Mr. Gibb.

Mr. Nick Gibb: Thank you, Madam Deputy Speaker. I should like to add my welcome to you to the Chair.
As the hon. Member for Stroud (Mr. Drew) pointed out, he and I, and other members of the renewable energy group, went to Denmark recently to see wind energy at its best. We went at the expense of National Wind Power, a subsidiary of National Power. Denmark produces 13 per cent. of its power by wind. I also spent two days recently at Sellafield, where I received from BNFL the same briefing as the hon. Member for Hazel Grove (Mr. Stunell).
I congratulate the hon. Member for Ochil (Mr. O'Neill) and other members of the Trade and Industry Committee on an excellent report on BNFL. It was both balanced and well informed, and follows other reports by the Select Committee focusing on energy issues. The report published in June 1998, in particular, focused specifically on energy policy.
It is commendable that the Select Committee is taking energy policy seriously. These issues matter. They go to the root of our industrial competitiveness and to the heart of our environmental policy. That is in sharp contrast to the Government, whose energy policy is in complete disarray. Their only major pronouncement on policy was the 1998 energy White Paper. Everyone knows that that was simply an exercise in trying to justify—albeit unsuccessfully—the gas moratorium, a decision now reversed, which was motivated entirely by internal Labour party considerations. It has cost industry millions of pounds in higher electricity prices and will lead to millions of tonnes of additional CO2 emissions.
Nuclear power today provides 30 per cent. of our electricity consumption. It does so without emitting CO2 and is thus a highly environmentally friendly source of energy. As my right hon. Friend the Member for Fylde (Mr. Jack) and the right hon. Member for Copeland (Dr. Cunningham), whose constituency includes the Sellafield site, pointed out, nuclear energy saves 79 million tonnes of CO2 being emitted into the atmosphere every year.
The concerns about nuclear energy are focused on safety and on what to do with nuclear waste. We share those concerns.
The Select Committee recognised in its earlier report on energy that it would be wrong to allow those concerns to lead to a dogmatic abandonment of nuclear power. As the hon. Member for South Thanet (Dr. Ladyman) explained well, if we are serious about our international commitments under Kyoto to reduce greenhouse gas emissions to a level 12.5 per cent. below 1990 levels


by 2008–12and—this is the important point—to keep them at that level beyond 2012, it would be foolish to rule out nuclear energy.
Our goal must be to have a balanced and secure energy policy, which enables us to meet our carbon dioxide targets. At present, 30 per cent. of our electricity comes from nuclear sources, 30 per cent. from gas and 30 per cent. from coal. The switch from coal to gas in the past 10 years will enable us to achieve a 15 per cent. reduction in CO2 emissions by the end of this year. From this year onwards however, the Government's figures show an increase in greenhouse gas emissions. From 2010, the increase will become steep.
The key factor, as other hon. Members have said, is the decommissioning of the old Magnox power stations in the next decade, as they account for about 8 per cent. of electricity production. Replacing that plant, even with gas, will still result in significantly higher carbon dioxide emissions.
Huge increases in the demand for electricity are also expected. Any notion that we can reduce our demand is nonsense. The increases will principally be caused by the internet. The Financial Times recently reported that demand for electricity in London alone would increase by 20 per cent. in the next four years, solely due to the building of 10 internet hotels there.
The draft climate change programme published by the Department of the Environment, Transport and the Regions showed that, far from our achieving a 12.5 per cent. or a 20 per cent. reduction, CO2 levels would be at or just below 1990 levels by 2020, which would represent a significant increase compared with the present level.
Therefore, we have a significant problem to tackle—a problem that is made worse by the decision to delay for three years the building of new gas-fired plant. It is encouraging to note that in a written answer on 30 October the Government abandoned any pretence that the gas moratorium was linked to reforms in the electricity market, when they said that the stricter consent policy would be lifted this month, notwithstanding the fact that the new electricity trading arrangements would not be up and running until March next year.
We need a serious and considered energy policy from the Government—one that is balanced and secure, taking into account the decommissioning of the Magnox stations, recent hikes in the price of gas and new developments in clean coal technology such as integrated combined cycle gasification, and tackling the nuclear issue without any ideological baggage.
The core of the debate is that if we as a nation are serious about fulfilling our long-term international CO2 obligations, we have a choice between pushing up the proportion of electricity generated from renewable sources to way beyond the Government's present targets, which would result in significantly higher electricity prices, and dealing with the nuclear issue.

Mr. Savidge: Members of the Environmental Audit Committee asked a number of leading experts from this country, such as the Round Table on Sustainable Development, and from Europe—for example the European environment committee—for their views on what is most environmentally friendly and economic. They put

energy efficiency first, followed by renewables and fossil fuels in order of carbon burning, and they regarded the nuclear option as the worst from both points of view.

Mr. Gibb: That is their opinion and they are entitled to it. It is an opinion that we should hear in this debate, although it is not necessarily one that is shared by many people. It is not realistic to assume that we can make up for the 8 per cent. of electricity that will be lost as a result of the closure of the Magnox stations through energy efficiency—3 per cent. is the maximum that that would save—and demand for electricity is increasing hugely. The figures do not stack up.
The Government's policy—to the extent that they have a coherent policy at all—appears to be, by default, abandoning their Kyoto targets after 2012. That lack of coherence has infected the Department of the Environment, Transport and the Regions in its equivocation over the decision to approve the commissioning of the main Sellafield MOX plant. That facility has been ready for more than two years, but still no decision about full commissioning has been made.
Paragraph 70 of the Trade and Industry Committee report cites a report by the PA Consulting Group, noting:
It warned that "any significant delay to the commissioning start date" could affect customer confidence and "place BNFL at a competitive disadvantage".
The PA Consulting Group report was published in 1997. In November 2000, a decision has still not been made. The Select Committee report concluded:
The delay in deciding on whether to permit full commissioning of the Mox plant has gone on long enough.
So it has.
Delay, dither and incompetence are the hallmark of policy making by Ministers on this issue—never more so than in the mishandling of the whole MOX data falsification affair by the Minister for Energy and Competitiveness in Europe. The House is aware that the matter first arose in September last year—as the right hon. Member for Copeland pointed out—when it was discovered that data records of secondary safety checks on a batch of MOX fuel pellets for a Japanese client had been falsified. As a consequence, operations at the facility were suspended—rightly so.
Despite initial statements to the contrary, it was later discovered that the pellets had already been shipped to Japan by the time the data falsification became known. As the House is also aware, the pellets were in fact perfectly safe. The secondary safety check was just that—an additional check on the size of the pellets, requested by the client. As the hon. Member for Ochil pointed out, the issue was one of contract compliance and not one of safety.

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): It is important to make it clear to the House that the checks that were carried out were for quality assurance; safety has never been in question. Indeed, the nuclear installations inspectorate made that absolutely clear. It is most important that the hon. Gentleman gets his facts right; jobs are riding on this matter—as is the reputation of an important industry.

Mr. Gibb: It is very important that the right hon. Lady listen to what I am saying. My point was precisely that: it


was not a safety issue—solely one of contract compliance. The right hon. Lady repeated what I said; I have no disagreement with her on that point.
However, the issue became one of how not to treat our most important business relationships. In February this year, just before the nuclear installations inspectorate report into that incident and into other management matters at Sellafield, a team of DTI officials visited Japan with a copy of the draft NII report to discuss the incident with the Japanese Government and the Japanese electricity industry. After those consultations, the British embassy in Tokyo—whose officials were closely involved with the negotiations—was firmly of the opinion that the MOX fuel that had been shipped out to Japan would have to be returned to Sellafield.
The advice from the embassy stated that
we feel that we have no choice but to look very seriously at the option of agreeing to return the fuel. And agreeing sooner rather than later so as …to avoid serious long-term damage to our relations with Japan in the nuclear field.
My understanding is that the advice from the embassy was strongly in favour of returning the fuel and warned Ministers of the consequence of not doing so.

Mrs. Liddell: Will the hon. Gentleman help the House to get to grips with how factual his position is? On which date was that advice given?

Mr. Gibb: The date of the advice was 14 February. It states:
Grudging agreement to return of the fuel after half-hearted attempts to find alternatives could be very damaging to BNFL and more widely. The most effective—possibly the only—way of restoring confidence and securing business for BNFL in a reasonable time scale would be to agree soon to return of the fuel.

Clear advice was given in February. Why did the Minister not accept that advice? Even without the advice, it was perfectly clear that the fuel would have to be returned. There were clear signals from the Japanese that they would not—indeed, could not—accept that the fuel remain in Japan.

Mrs. Liddell: Will the hon. Gentleman give way?

Mr. Gibb: I shall give way to the right hon. Lady in a minute, after I have asked a few questions. Why did she and her officials continue to refuse to allow BNFL to take back the fuel? Why did it take until July before the decision was changed and it was agreed that BNFL could take back the fuel? Will she reply to those questions?

Mrs. Liddell: I am grateful to the hon. Gentleman for allowing me to intervene because it gives me an excellent opportunity to set the record straight. The House will recall that the hon. Gentleman said that the alleged document to which he has referred was published on 14 February. I regret the fact that he has not done his homework, because on 10 February, Mrs. Anna Walker, the director-general of energy at the Department of Trade and Industry, issued a press release following her discussions on the return of the fuel with the Japanese authorities. The hon. Gentleman should have gathered from our debate that this is a serious issue, so he should get his facts right and do his homework. This is not rocket science; it is common sense.

Mr. Gibb: It is rocket science, and I have got my facts straight. The advice from the embassy is absolutely clear

and it was not from Anna Walker. The British embassy in Tokyo told Anna Walker on 14 February that it was its firm advice that the MOX fuel should be returned to Sellafield from Japan at the earliest possible moment. BNFL was stopped from allowing the fuel to come back. It was only in response to pressure and in July this year that the fuel was allowed to come back. It was that grudging acceptance to take back the fuel in July that caused the damage to our relations with Japan.
Conservative Members understand the great importance to BNFL of its relationship with its Japanese customers and attach enormous importance to the UK's relationship with Japan. Japanese utilities have been an important factor in BNFL's commercial success, particularly the operations at Sellafield, which is the biggest employer in west Cumbria. BNFL is a world-class company with 23,000 highly skilled and competent employees worldwide with a proven track record in dealing with waste management and decommissioning. There are huge markets for those services here and overseas.
The right hon. Lady has done nothing to address my points other than to say that the DTI issued a press release on 10 February—so what? All that she has achieved so far is to misjudge totally the handling of the MOX falsification issue and thereby damage the relationship with BNFL's principal customer. Therefore, for the benefit of the House, will she tell us what will now happen to the returned MOX fuel from Japan?
The right hon. Lady and the Secretary of State have also managed to criticise the management of BNFL in public and in such a way that it has caused further damage to BNFL's reputation overseas, particularly in the United States, a crucial market for BNFL's decommissioning skills and experience. The Secretary of State's comment in The Independent on 17 February that
there is a fundamental flaw in the management at BNFL
has done incalculable damage to the company's reputation overseas.
Despite such language and the other statements by the right hon. Lady about root-and-branch reform of management, is she confident that all the managers and senior managers with direct responsibility for the data falsification issue have been moved and that the inherent problems that led to it happening in the first place have been dealt with? Indeed, my understanding is that one particular senior manager, with direct responsibility for this matter, was actually promoted, with the right hon. Lady's assent, to the board of BNFL. Is she confident that the Sellafield culture that many felt was at the root of the data falsification problem has changed? Those concerns echo the comment in paragraph 80 of the Select Committee report, which says that
the extent of change in managerial arrangements is rather less than appears.
The Government's track record on energy matters is lamentable. They have disastrously handled the Utilities Bill, which was incompetently drafted and badly taken through Parliament. That is an appalling policy basis that will burden our energy sector with millions of pounds of unnecessary costs, as will the disastrous climate change levy and the hefty duties on fuel. The Government have no coherent energy policy to deal with rising CO2 levels, and now we have the crass incompetence of their handling of the problems facing BNFL. They could so easily have been sorted out—indeed, they still could.
If the right hon. Lady had understood the validity of the advice from the British embassy in Tokyo about taking the fuel back; had used more considered language in responding to the NII report; and had understood the management issues at Sellafield and tackled them as a senior Minister should, BNFL would undoubtedly have ridden the MOX storm by now and established new and lucrative contracts with the Japanese. As it is, the Japan Times reported on 16 October that 10 Japanese electricity companies had recently awarded a £500,000 reprocessing contract to COGEMA, BNFL's French competitor. That is the legacy of the right hon. Lady's stewardship.
These are serious matters and this has been a serious debate. I hope that the Minister will address the issues raised by all Members with that seriousness in mind.

The Minister for Energy and Competitiveness in Europe (Mrs. Helen Liddell): As this is the first time that I have participated in a debate before you in your present capacity, Mr. Speaker, may I say what a great pleasure it is to see you in the Chair? I will try very hard to avoid incurring your wrath for as long as possible.
I have often thought that the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) inhabits a parallel universe, and tonight we have had proof of that. He made spurious allegations that he punted in The Times this morning before the debate. He admitted that the date on the letter that he claims to have received is 14 February, although the issues were dealt with on 10 February. I thought that the hon. Gentleman was an accountant; perhaps I should ask him to do my tax returns.

Mr. Gibb: Will the right hon. Lady publish all the advice that she received from the embassy in February, to put the matter straight?

Mrs. Liddell: Some of the advice given to me is of a commercial nature.

Mr. Gibb: Ah.

Mrs. Liddell: Well, the hon. Gentleman has pointed out that other companies are involved. I am interested in securing the jobs of people at BNFL, and the hon. Gentleman should have taken into account the points made by the right hon. Member for Fylde (Mr. Jack) about the significance of those issues for continuing employment in an important industry. The hon. Gentleman has altogether missed the point of the debate and completely failed to take into account the serious issues that we are addressing.
I shall seek to respond to all the points that have been made, but contributions have been lengthy and time is limited, so I will write to hon. Members about points that I do not have time to tackle.
This has been an excellent opportunity to debate BNFL and the proposed public-private partnership. I have listened with great interest to the views that have been expressed. My hon. Friend the Member for Ochil (Mr. O'Neill) set the issues in context when he introduced the debate. It is important to note that openness was a

recurrent theme of the debate for Labour and Liberal Democrat Members. The key to the future of British Nuclear Fuels in a PPP is the opportunity for openness that will be provided.
There is a wide range of views on nuclear power and reprocessing, but there is consensus in the recognition that BNFL is a major UK company, playing a unique role in some of the most challenging areas of the United Kingdom energy scene. Following the acquisition of Westinghouse and ABB, BNFL is now a global company operating in 15 countries and employing 23,000 people worldwide. BNFL's fuel manufacturing and service business, which includes fuel manufacturing sites in the United States, and the highly regarded Springfields site to which the right hon. Member for Fylde referred, has the expertise to supply fuel solutions to the world's nuclear reactors. I should point out that the right hon. Gentleman has apologised for his absence; I understand that he has another engagement.
The right hon. Gentleman and my hon. Friend the Member for Ochil spoke about the future of Sellafield and Springfields, as did my right hon. Friend the Member for Copeland (Dr. Cunningham). Few Members of Parliament have shown a greater commitment to a major employer in their constituency than my right hon. Friend has demonstrated for many years. His advice to me has been extremely important in enabling me to get to grips with the complexity of the issues, and I should like to put on record my gratitude to him.
The future of the sites depends on BNFL getting contracts with its customers. The critical issue was summed up by my hon. Friend the Member for Ochil: it is not about taking on some of the more spurious attacks on BNFL, but about restoring its business integrity. That has been the main aim of the Government and the companies throughout the challenges and difficulties that have beset BNFL. As my hon. Friend the Member for Warrington, South (Ms Southworth) pointed out, the company often operates at the very forefront of science, it is a major export earner, it makes a significant contribution to the United Kingdom economy and it is the dominant employer in west Cumbria. It is extremely important that we get our policies right.
The last year has been difficult and the outlook remains challenging—everyone acknowledges that. However, I commend the substantial efforts and real progress that have been made throughout the company at every level in recent months. Led by the company's new management team of Hugh Collum and Norman Askew, a wide range of actions has been taken to get the company back on track. When we got to grips with what had happened, we realised the significance of the MOX data falsification issue, so I commend the speed with which Hugh Collum, the new chairman, took charge and responded to my right hon. Friend the Secretary of State and me by making the necessary management changes. The report of the Select Committee on Trade and Industry is an important part of getting BNFL back where it belongs.
The public-private partnership is not a Treasury-driven means of raising finance. It is designed not to raise money, but to bring into the company private sector commercial disciplines to help it to arrive at sound commercial judgments about business opportunities and investment decisions, to introduce sound business practice and to end the cosy relationships to which my hon. Friend the Member for Ochil referred. The hon. Member for


Hazel Grovey (Mr. Stunell) spoke about the lack of openness and transparency, and other hon. Members mentioned BNFL's accounts appearing impenetrable—now, they are far more transparent. It is for those reasons that we want to introduce the PPP.
I was asked why we had decided on a PPP, not full privatisation. One of the reasons is that we want to proceed with consensus, and a consensus surrounds the idea of a PPP—the need to introduce private sector disciplines is recognised and the proposal has been warmly welcomed by the company's management, its staff and their unions.

Mr. O'Neill: My right hon. Friend says that the exercise is not Treasury driven, but I imagine that it will involve the new partners bringing some money to the table—a sum that the Treasury will not have to underwrite through the public sector borrowing requirement. Therefore, there is an aspect of Treasury involvement, although we do not yet know how much money will be involved.

Mrs. Liddell: My hon. Friend's second point is the more significant. Now, the important thing is to get BNFL back on track as the significant global player that it should be. In view of BNFL's problems, let me emphasise that there will be no PPP before the second half of 2002, at the earliest. It is also important that no rigid timetable is connected with the PPP, because we have to ensure that we get the fundamentals right.
The report mentions the Government's role as an effective shareholder prior to the introduction of the PPP. My right hon. Friend the Secretary of State for Trade and Industry and when dealing with BNFL from day to day, are highly aware of the importance of that role. In the past, under the previous Administration of whom the hon. Member for Bognor Regis and Littlehampton is so proud, the policy was largely that of absentee landlordism. However, as my hon. Friend the Member for Ochil said, occasionally scientific principles were used to divert attention from some of the significant issues that there was a need to grasp because of the technical complexity.
I believe that it is critical that the Government be an intelligent shareholder, but it is not the task of the Government to run the business. Governments do not run businesses. That is the responsibility of the new management. However, we do not have carte blanche to operate as an absentee shareholder.
There have been references to British Energy and contracts between it and BNFL. These are commercial issues between the companies. If we insist that BNFL operates in a proper commercial manner, we cannot dash in and intervene. That is important.

Mr. Stunell: rose—

Mr. Chaytor: rose—

Mrs. Liddell: I shall take two more interventions. I must then make progress.

Mr. Stunell: The Minister has talked about a commercial decision. Would the move to a PPP be a commercial decision, or would the matter come back to the House?

Mrs. Liddell: The issue of a PPP is some way away, because there are many fundamentals to get right first.
It cannot be earlier than the second part of 2002. I can assure the hon. Gentleman that it is not necessary to have a crystal ball to know that we shall be discussing BNFL much more in the House between now and then. The House must be confident that BNFL has met important safety targets as well as its financial and other targets. I, or whoever is the Minister with responsibilities for energy, must be confident of that on behalf of the Government.

Mr. Chaytor: Does my right hon. Friend accept that when one party is the sole shareholder, it is difficult to argue that these are commercial issues with which we have no involvement? In any ordinary company, the sole shareholder would be involved in commercial decisions.

Mrs. Liddell: Part of the difficulty that we face is in encouraging BNFL now, and encouraging the two significant business lanes that lie ahead of it. We must encourage BNFL to operate as a commercial entity. That means that those who deal with BNFL must also be prepared to deal with those matters.
I believe that we have a much greater understanding of the company now as a consequence of the PPP process. I said before the Select Committee on Trade and Industry that I wanted to shine a light into every corner of the company. I am not confident that I have yet got into all the dust balls. However, a light is being shone into every part of the company. I have a regular schedule of meetings with the chairman and the chief executive. I have also met the new non-executive directors who are being appointed to the board, and there is on-going contact.
Our objective is to focus on the major strategic issues and to ensure that we work together on specific problems, such as the difficulties with the data-falsified fuel shipped to Takahama. We are a much better informed and much more intelligent shareholder.
As a shareholder, we want to see the new management team at BNFL succeed in getting the company back on course. We want BNFL to make the most of the scientific and engineering excellence within the business, but that must be allied to real commercial acumen. That is why I am so encouraged by the position that senior management takes on examining its strategy, thinking forward, asking questions and being realistic about the answers.
I have been asked about the strategic review. I imagine that it will be the spring of next year before the company will be in a position to come forward with it. Many difficult issues have to be addressed, not least of which is getting customers back.
I have also been asked about targets. The Government have a key role in encouraging target setting and target meeting. As we did last year, we are setting the company a range of targets in key areas of operation. Safety, health and environmental performance remain paramount. We want the company to achieve improved standards in all those areas. Norman Askew is monitoring the company's performance against four key measures: conventional safety, nuclear safety, environmental performance and dangerous occurrences. That will capture events that were not tracked under the former environmental, health and safety index. The company intends to publish an annual assessment of its performance on those issues in its environment, health and safety report. That is a big move forward and it is the sort of openness for which right hon. and hon. Members have been asking.
Those targets, which are being discussed with the regulatory authorities, will help the Government to track the improvements. They will complement, but not substitute for, normal regulatory processes. I assure the hon. Member for Hazel Grove that the introduction of a PPP will in no way change the relationship with the regulator. The regulator must continue to have a strong influence on performance in BNFL.
I say to the work force at BNFL that their skills and productivity have a crucial part to play in the company's future. BNFL and the trades unions representing the work force have agreed to work together to develop a competency framework to measure the performance of individuals and to identify and meet particular training needs. We will monitor that and check the implementation of the programme.
There was a realistic response from the trades unions when the MOX data falsification issue arose—a more realistic view of the situation than was displayed by the hon. Member for Bognor Regis and Littlehampton. Such involvement is critical. I want real improvements in relationships throughout the company. I believe that something has been created that can be built on to create a company that has the potential for excellence, but that company must be prepared to be realistic about some of the challenges that it faces.
Specific financial performance targets are in place. Part of the issue for BNFL is the effective management of liabilities, which is central to its business. Therefore, we have set it a target based on effective delivery of several significant decommissioning and waste management projects to time and to cost.
I could not agree more with the hon. Member for Hazel Grove about BNFL seeking the opportunity to move into different sectors. Several hon. Members have talked about

new build, and that is why ABB and Westinghouse are so important. Their purchase gives the company access to the technology and expertise. However, the Government believe that it is for the generators to decide the nature of the future generating capacity. That will be based on whether that technology can meet the expected high safety and environmental standards at an economic cost. Once again, that comes back to the need to ensure that decisions are taken coherently and effectively.
Several hon. Members spoke about the Sellafield MOX plant. That matter will be resolved by the Deputy Prime Minister and the Secretary of State for Health. I cannot say when that decision will come, but I make a straightforward, common-sense point. Giving authority for the Sellafield MOX plant also requires knowing that there are customers.
BNFL is working hard to restore Japan's confidence in it—it is essential that that happens. I met the president of the Japanese utility, Tokyo Electric Power Company—TEPCO—last Thursday to discuss the issues. A very good co-operative relationship exists, but it is for BNFL and the utilities companies in Japan to come to contractual arrangements. I understand that BNFL and Kansai Electric are discussing the next steps, including practical arrangements, for return of the fuel. The issues involved are not easy to address and the Government will do what they can to assist.
We have had a long debate tonight about the corporate strategy and reprocessing. As a shareholder, the Government are committed to reprocessing, but there must be a proper analysis of the prospects for the company. The debate has been useful. There are many issues still to be resolved, but we have made a start, and one of the greatest achievements is the recognition on the part of the company that openness must be all.

It being Ten o'clock, the motion for the Adjournment of the House lapsed, without Question put.

Orders of the Day — Indebtedness and Poverty

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Sutcliffe.]

10 pm

Mr. John McFall: I am grateful for the opportunity to speak about poverty and indebtedness.
Poverty
is the biggest scar of a civilised society.
So said the Secretary of State for Scotland in evidence to the Select Committee on Scottish Affairs in its report entitled "Poverty in Scotland". That was appropriate, because we cannot allow it to be thought that poverty and debt are problems only for people far away.
In Scotland, one of four households live in poverty, on incomes below half the average income. In June this year, the United Nations Children's Fund published a report that placed Britain in the bottom four of a league table measuring child poverty in industrialised countries. Child poverty in Britain has tripled over the past 20 years, and on average one in five children in Britain now live in relative poverty—in an environment where national income has doubled and redoubled since 1950. In a climate in which most of the population are becoming richer, the material and social deprivation of a quarter of the population is unacceptable.
I know that the Government are serious about their pledge to eradicate child poverty by 2020, and I commend the work of the social exclusion unit, which has devised strategies to tackle poverty and social exclusion. Clearly, the prevailing social and economic conditions are part of a long-term inheritance and cannot be reversed at once.
However, there is no room for complacency. Poverty in the United Kingdom must remain at the top of the agenda. Urgent and far-reaching reforms are needed if Britain is to improve its appalling record on child poverty. The work of the social exclusion unit has made some important contributions so far, as has the Department of Social Security through its two annual poverty audits. It is crucial that that work continues to be developed and prioritised. Furthermore, if the Government's strategy is to be coherent and effective, it must address the various dimensions of poverty and social exclusion, and ensure that policies are properly co-ordinated and implemented across Departments.
I have called the debate tonight to highlight one of the faces of poverty in the UK which I believe needs to be more central to the Government's strategy. Evidence suggests that there is a growing crisis of indebtedness in the UK, particularly among people on low incomes. That is borne out by a recent report by the National Association of Citizens Advice Bureaux, which revealed that in England and Wales, 1.5 million people approached their local citizens advice bureau for help with debt problems last year. Scottish CABs have reported similarly critical levels of indebtedness, with debt problems amounting to about £60 million handled in 1999.
My own CAB in Dumbarton has recorded in the past 18 months an increase of more than 50 per cent. in the number of debt and consumer inquiries. I pay tribute to the local manager, Joe McCormick, and his dedicated team for their many years of service to the community.
These volunteers should be assisted by a legislative and statutory framework that supports, rather than hinders, their work.
Progress has been made through the work of the social exclusion unit in identifying some of the causes of financial exclusion in the UK. It has rightly identified that the Post Office and high street banks have an important role to play in widening access to mainstream services. It has also made some important recommendations about how the Government should encourage credit union development.
However, the social exclusion unit needs to develop a more comprehensive interdepartmental strategy. That should address not only access to financial services, but ways of tackling the serious debt problems which result from financial exclusion, and which increase the burden of poverty on the country's most vulnerable citizens. In particular, such a strategy would need to address issues relating to door-to-door lending and the inadequate provisions of the social fund. More attention also needs to be given to assisting credit unions in reaching the poorest in society.
Take the issue of extortionate lending—in a climate where, according to Bristol university, 29 per cent. of households have no access to mainstream credit, it is not surprising that more and more people turn to high-cost private moneylenders to pay for essential items. They are then subject to excessively high interest charges and irresponsible lending practices.
Provident Financial, the largest home credit company, has seen its customers grow by more than 300,000 since 1995. In 1999, it charged its 1.5 million customers a typical APR of 164 per cent. and, from a turnover of £422 million, it made a pre-tax profit of £155 million.
Earlier this year, as I said, the Scottish Affairs Committee published a report on poverty in Scotland. It found that a £500 loan from a Glasgow consumer credit company could generate interest amounting to £310—but the same loan from Cranhill Credit Union Ltd. would cost £18.60. The Committee also found that the company in question encouraged people to take out further high-cost loans in order to pay off existing debts. Further examples of moneylenders targeting the poorest, offering loans without taking proper account of ability to repay, and abusing the regulations on cold calling by offering shopping vouchers, are increasingly evident.
Problems of extortionate lending have been on the agenda for some time. In 1991, the Office of Fair Trading carried out a report into unjust credit transactions, and it found that
the extortionate credit provisions of the Act—
the Consumer Credit Act 1974—
have not effectively dealt with the problems to which they were addressed.
It made a series of recommendations which were referred to the Department of Trade and Industry in February 1999, and research was commissioned into the extent of extortionate credit lending.
The research was concluded in June 1999, but the findings were not published until April 2000. The DTI then announced its intention to restrict action on extortionate credit to just one of the 18 recommendations contained in the findings. It would appear that there has


been a failure to act in the interests of low-income households. In the meantime, lenders have continued to prosper.
My CAB refers specifically to breaches in the Consumer Credit Act. It says that a significant trend is a move towards passing on costs to clients. The OFT issued guidance on debt collection agencies and, specifically, on look-alike letters and collection charges, but it fails organisations such as the CAB time and again, as they are staffed by trained volunteers and it is up to them to collect the evidence on which to base a report on the unscrupulous behaviour of creditors.
To give one example, client A in Dumbarton CAB had a credit card managed by Clydesdale Financial Services, a subsidiary of Next plc. The bureau had been managing the client's repayments, and it negotiated with all creditors. The client was making regular repayments as agreed. Despite that, in July this year, Clydesdale levied a charge of £387 as an administration fee because the account was in arrears. There was no provision in the contract for such a charge, but despite repeated requests Clydesdale has refused to explain its actions or withdraw its charge. The matter has now been reported to the OFT. It has failed the CAB and the individual in my constituency. Several measures need to be taken.
First, the Department of Trade and Industry should publish all 18 recommendations contained in the Bristol university research. It should also publish a response to the consultation on consumer credit licensing that took place in May. A further consultation process should be undertaken with organisations that directly represent the concerns of vulnerable consumers. That could be achieved through the debt task force or another appropriate body.
It is time for the Government to take a serious look at the activities of licensed credit brokers, especially the practice of banks, credit card companies and other financial institutions of offering unsolicited credit facilities to vulnerable people, thereby encouraging them to incur financial commitments that they cannot sustain. They are thus caught in a cycle of deprivation. A clear timetable for implementing recommendations should also be drawn up. Urgent consideration should be given to setting statutory maximum interest rates, with reference to successful models in other European countries.
The Commission on Social Justice, which the late John Smith set up in 1994, stated:
Perhaps the most soul-destroying aspect of Income Support is the Social Fund.
Many people and non-governmental organisations believe that the inadequate provisions of the social fund constitute one of the reasons for the rapid growth of the private credit industry. The current system, which offers mostly loans, replaced the single payments system in 1988. At the outset, the budget was reduced by 0.5 per cent. It seems a small amount, but the effect on families was devastating. Research that the Conservative Government initiated found that 70 per cent. of those repaying loans experienced difficulties in meeting the costs of fuel and clothes when the money ran out.
Despite increases in benefits for children and other initiatives, the current level of social security is not always sufficient to enable families to meet all basic needs. Families at some time need access to a cash safety

net. Furthermore, no United Kingdom Government have carried out a proper assessment of the minimum income needed to maintain health and dignity, and meet essential needs, since before the introduction of the welfare system in 1948.
Several key reforms of the social fund should be undertaken. First, a minimum income standard should be researched and established by government as a target for setting benefit rates. Secondly, the budget for grants should be increased considerably. Thirdly, new grants should be introduced to help families to meet specific needs. They should be paid at particular stages of a child's life. Fourthly, an in-depth review of the workings of the social fund, and its impact on some of the most vulnerable sections of the community, is long overdue and should be undertaken.
The fund should be part of an interim programme of assistance to be phased out in 2020, when the Government meet their poverty eradication targets. Grants should be perceived as a means of ensuring that children have the right to an adequate standard of living, in accordance with the United Nations convention on the rights of the child.
I commend the work of the social exclusion unit and the Treasury in supporting the growth of the credit union movement. However, groups such as Debt on our Doorstep, which has petitioned me, are worried that the new regulatory framework that the Financial Services Authority is drawing up is in danger of excluding those whom it most needs to reach. Greater consideration should be given to methods of ensuring that credit unions' community and social functions are preserved and prioritised.
Credit unions in some areas have set up debt redemption schemes with local authorities. Those schemes provide funds to buy out debts held by companies such as Provident Financial. Their success has been proven by independent evaluation. As well as enabling credit unions to play a vital role in tackling financial exclusion, greater investment in debt redemption schemes would also help to ensure that funding for regeneration remains in the community rather than being turned into profits for big business.
Greater emphasis should be placed on ways in which local authorities can support credit unions in their areas. As the Scottish Affairs Committee stated, the best antidote to debt, next to an adequate income, is decent advice about money, which is properly resourced and capable of development. How about establishing a money advice hotline run by local authorities, which would enable people to get ready advice?
What action should the Government take? I suggest to my hon. Friend the Minister that, to support the growth and effectiveness of credit unions, the following is necessary. First, the Financial Services Authority should be encouraged to recognise the unique volunteer control of credit unions and to work closely with all sections of the movement to develop a distinctive framework that serves the business and community functions of credit unions. Secondly, central Government should make significant investment to fund redemption schemes through local authorities. Thirdly, local authorities should be strongly encouraged to offer a range of services to support credit unions, including help to fund debt redemption schemes.
The lethal combination of inadequate incomes, lack of affordable credit alternatives and extortionate interest rates means that low-income families are quickly trapped in a spiral of unsustainable debt. Debt will no longer be such a pressing issue when the Government's poverty eradication targets are met in 2020, the incomes of the poorest are raised to such a level that those people will be prevented from falling into desperate poverty, and community finance initiatives are universally accessible. We live in hope, but, as the Rowntree Foundation recently reported, a quarter of the population cannot afford to save even £10 a month. Therefore, in the meantime, improving access to affordable sources of credit would provide a lifeline to low-income families.
Furthermore, measures to respond effectively to high indebtedness must include greater protection against unscrupulous lenders and a radical review of the social fund. Initiatives to tackle debt and financial exclusion need to be more effectively joined up across Departments. The social exclusion unit, or another cross-departmental body, should work with the Treasury, the Department of Trade and Industry and the Department of Social Security to draw up a comprehensive plan to address the areas that I have outlined. Failing that, a key Department should be appointed to take the lead in producing an interdepartmental strategy.
The 10th anniversary of the United Kingdom's ratification of the UN convention on the rights of the child falls in 2001. Article 27 refers to the right to an adequate standard of living. If the UK's ratification of the convention is to have any meaning, and if Britain's appalling record on child poverty is to be improved, urgent action must be taken to set people free from the prison of debt. I commend the Government for the work that they have done, but I urge them to become more involved with the NGOs and others who are pushing the issue so that we can reach our target—before 2020, I hope.

The Parliamentary Under-Secretary of State for Social Security (Angela Eagle): I congratulate my hon. Friend the Member for Dumbarton (Mr. McFall) on his success in obtaining tonight's debate and on his choice of subject. As his serious contribution to this on-going debate showed, indebtedness and poverty are extremely important issues. When my right hon. Friend the Chancellor said today that we wanted all our citizens to share in the growing prosperity of the nation, he was definitely addressing many people who are in the situation that my hon. Friend described so vividly.
My hon. Friend discussed in detail the shameful legacy of the previous Government, who created a divided society in which many were left behind to face a lifetime of poverty with little opportunity to escape. Worse, the previous Tory Government claimed that the poor would always be with us. When Conservative Members discuss such issues across the Floor of the House, it is clear that they still believe that. They take the view that Governments cannot make a difference—and the legacy that we inherited was that one household in five including adults of working age was workless.
As my hon. Friend pointed out, there was a huge growth in the number of children living and growing up in poverty, despite a 90 per cent. real terms increase in

social security expenditure. The bills of economic failure had to be paid, and everything was left to the market, which forced everyone, including the elderly, the weak and the disadvantaged, to fend for themselves. In turn, that weakened or removed the safety net, which was so full of holes that people fell through it.
As my hon. Friend eloquently set out, the results of the careless indifference of that approach to society are stunted life chances, loss of opportunity, waste of talent and lives made narrower and undoubtedly shorter. As he indicated, the Labour Government reject that counsel of despair and believe that Governments can make a difference. I welcome my hon. Friend's acknowledgement of the work that the Government have done so far to tackle poverty and the lack of opportunity and fairness in our society, which we inherited.
I agree that that is a huge and challenging agenda, and much work remains to be done. The Prime Minister has set us the tough target of eradicating child poverty in 20 years. By the end of this Parliament, we will be on course to have lifted 1.2 million children out of poverty, which is a good beginning. My hon. Friend mentioned "Opportunity for all", the Government's annual publication of their anti-poverty report, which charts our progress against a wide range of indicators, including levels of income, length of time on benefit, widening educational opportunities, access to health services, child care and other issues. As my hon. Friend said, poverty is multi-faceted and the cure for it is not simple. However, as he pointed out, the cure relies on a multi-dimensional cross-departmental approach, which we are putting in place. I am not claiming that it is perfect yet, but we are working on it. I certainly welcome my hon. Friend's contribution to the debate tonight.
The latest report highlighted the progress made in the three short years in which we have been in power and the two years for which we have published "Opportunity for all". The number of lone parents on income support has fallen by more than 100,000 since May 1997, and the proportion of children in workless households fell to 15.8 per cent. in spring 2000, which is down from 17.9 per cent. in spring 1997. That means that 250,000 fewer children are living in workless households and 300,000 fewer children are in families who claim out-of-work benefits. That is a start, and we are getting somewhere.
The number of children whose parents have been claiming benefit for more than two years has fallen by nearly 200,000 since 1997. Educational standards, which represent the way out of some of these difficulties, are already improving, and the proportion achieving the expected numeracy standard at age 11 is up from 62 per cent. in 1997 to 72 per cent. in 2000. In literacy, 63 per cent. achieved the standard in 1997—a figure that rose to 75 per cent. in 2000. The number of permanent exclusions from school has gone down dramatically.
That is a start, and demonstrates that Government action can make a difference and, indeed, has done so. The national minimum wage has helped 1.5 million people, and there has been a 26 per cent. real terms increase in child benefit in three years. Even before today's very welcome announcements by the Chancellor, all families with children were better off by £850 a year on average as a result of changes in the social security system and the tax system. Working families tax credit is


a key aim, and will make a real difference to many people who now have a real prospect of work for the first time in many years.
My hon. Friend vividly described the problems of indebtedness, and many of us recognised those problems from our constituency case loads. We have seen shady people who give out family allowance books to mothers and collect them back after they have come out of the post office and handed their money over. We know what goes on. Problems of indebtedness and financial exclusion exacerbate the problems that are faced by the poorest in our society.
My hon. Friend discussed the role of credit unions and the social fund in providing some answers, and raised the important issue of extortionate lending. We know from our own research that low income families are as likely to use credit as high income families, but use it for necessities rather than luxuries, and get a much worse deal than those who borrow higher up the income scale. We want to tackle those problems. My hon. Friend mentioned the 44 recommendations of the 14th report of the social exclusion unit policy action team, to which we shall shortly be responding in detail.
I have considerable sympathy with what my hon. Friend said about extortionate lenders, and I recognise many of the tactics that he described. Loan sharks are a curse. This matter has been taken up by my right hon. and hon. Friends at the Department of Trade and Industry, and I shall pass on my hon. Friend's comments to them, as they follow up the recent debt summit. They are examining how to update the Consumer Credit Act 1974 to limit the power of extortionate lenders, and deciding on their future policy.
My hon. Friend is right to stress the importance of credit unions. As providers of low-cost credit to people on low incomes or with a poor credit history, they have the potential to make a significant contribution to the fight against financial exclusion. The movement as a whole needs to grow. Credit unions serving deprived communities must be central to that growth, and we are taking steps to support their development.
By 2002, we want to extend the maximum loan repayment periods allowed, give credit unions greater flexibility on disposal of repossessed collateral, remove

the maximum membership limit, and ensure that members receive protection as depositors similar to that received by users of other lending institutions. When a credit union works well it is fantastic, but if it is dodgy it can create enormous problems. We must ensure that with the growth of credit unions comes an assurance that they are above board and that money put into them is safe.
My hon. Friend mentioned the changes to the social fund. We have already introduced changes, which have been widely welcomed, to the way in which the budgeting loan system works. Independent research has shown that the change to the budgeting loan scheme has made it easier to use, quicker, more easily understandable and less intrusive for applicants.
Other changes to the social fund in the past three years have included two increases in the amount of money allocated to the grants budget since 1997. Those were the first increases since 1994. There has been a 15 per cent. increase in expenditure on budgeting loans, which is up to nearly £400 million, with a 9 per cent. increase in the number of successful applicants, and only a 5 per cent. increase in the number of refusals. We should contrast that with the Tories' plans to decimate the fund by taking £90 million out of it to pay for their spurious pension proposals, which will hit women, children and people with disabilities, who are the main users of the social fund, far harder than anyone else in society. As my hon. Friend said, they would hit the poorest and most vulnerable harder. It is a cruel policy.
I am not saying that the social fund is perfect. I should like to send my warm wishes to the Debt on our Doorstep campaign, whose representatives I met at the recent party conference. We had a long discussion about some of the issues that my hon. Friend has raised. He is right to say that we need a cross-departmental approach. I promise that I will consider the suggestions that he made and will pass them on to the relevant Departments. I assure him that poverty and its alleviation will remain at the top of our priorities. I welcome his interest in the issue, and the fact that we have been able to have this short but important debate.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes past Ten o'clock